Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd
[2010] WASCA 229
•3 DECEMBER 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WHITEGUM PETROLEUM PTY LTD -v- BERNADINI PTY LTD [2010] WASCA 229
CORAM: BUSS JA
NEWNES JA
MURPHY JA
HEARD: 2 AUGUST 2010
DELIVERED : 3 DECEMBER 2010
FILE NO/S: CACV 53 of 2010
BETWEEN: WHITEGUM PETROLEUM PTY LTD
Appellant
AND
BERNADINI PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :BEECH J
Citation :WHITEGUM PETROLEUM PTY LTD -v- BERNADINI PTY LTD [2010] WASC 108
File No :CIV 1006 of 2010
Catchwords:
Real property - Lease - Option to renew - Principles governing the purported exercise of an offer to renew - Whether the appellant/lessee validly exercised the option
Legislation:
Nil
Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant: Mr J A Thomson
Respondent: Mr B Dharmananda
Solicitors:
Appellant: Holborn Lenhoff Massey
Respondent: Gadens Lawyers
Case(s) referred to in judgment(s):
Ballas v Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193
Bava Holdings Pty Ltd v Pando Holdings Pty Ltd (1998) NSW ConvR 55‑862
Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115
Catley v Watson (1981) V ConvR 54‑003
Central Pacific (Campus) Pty Ltd v Staged Developments Australia Pty Ltd (1998) V ConvR 54‑575
Ex parte Callan; Re Smith (1968) 87 WN (Pt 1) (NSW) 595
Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10; (2007) 33 WAR 182
Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27; (2003) V ConvR 54‑680
Jones v Daniel [1894] 2 Ch 332
Lancecrest Ltd v Asiwaju [2005] EWCA Civ 117
Mackay v Wilson (1947) 47 SR (NSW) 315
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
MLW Technology Pty Ltd v May [2005] VSCA 29
Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192
Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASC 108
BUSS JA: On or about 17 February 1998, Bongiovanni Nominees Pty Ltd (Bongiovanni) and Whitegum Petroleum Pty Ltd (Whitegum) executed a written lease agreement, in registrable form, in respect of the land and buildings at 390 Nicholson Road (Corner Armadale Road), Forrestdale. Bongiovanni was the lessor and Whitegum was the lessee. The lease was for a term of seven years commencing on 1 December 1997. Clause 5.10 of the lease agreement conferred on Whitegum three options to renew, each for a further term of five years.
At all material times, the leased premises have been used by Whitegum to carry on business as a retailer of petrol and other goods. This use reflects cl 3.08 of the lease agreement which obliges Whitegum to use the premises 'as a service station and uses ancillary thereto'.
After the lease agreement was executed, Bongiovanni transferred its fee simple estate in the leased premises to Bernadini Pty Ltd (Bernadini). When Bernadini was registered as the proprietor, it became bound by the lease agreement including the options to renew.
Whitegum exercised the first option to renew. The term created by the exercise of the option expired on 1 December 2009.
Whitegum claimed that it had exercised the second option to renew. This was denied by Bernadini. Whitegum commenced proceedings in the Supreme Court against Bernadini for, relevantly, a declaration that Whitegum had validly exercised the second option to renew. Bernadini counterclaimed, relevantly, an order for possession of the leased premises. The action was tried before Beech J. His Honour held that Whitegum did not exercise the second option. He dismissed Whitegum's claim and ordered it to deliver up possession.
Whitegum has appealed to this court against the trial judge's decision.
Material provisions of the lease agreement
Clause 5.10(a) of the lease agreement confers the first option, cl 5.10(b) the second option and cl 5.10(c) the third option. There is no material difference between each set of provisions.
Clause 5.10(b) provides:
That the Lessee, having exercised the first option of renewal contained in the preceding sub-paragraph hereof and not being in breach of any of the covenants and conditions on the Lessee's part herein contained at the time of the giving of the Notice of Intention as hereinafter provided, shall have the option of renewing this lease for a further term of five (5) years from the expiration of the first renewed term on the same terms covenants and conditions herein contained (save and except any option of renewal) as follows:
(i)if the Lessee intends to exercise this option of renewal it shall give to the Lessor not less than (3) months' and not more than six (6) months' notice in writing of its intention (herein called 'the Notice of Intention');
(ii)for each year of the renewed term, the annual rental shall be determined at a rate established by multiplying the then current annual rental by the relevant Variation Factor (as hereinbefore defined); provided further that the rent so determined shall not be less than the rent payable by the Lessee for the then current term of the Lease.
(iii)if following the giving of the Notice of Intention and not less than twenty-one (21) days prior to the date which is three (3) months' prior to the expiration of the term of this Lease, the Lessor and the Lessee agree in writing the annual rental which would be payable for the first year of the renewed term then the Lessee shall be deemed to have exercised this option of renewal;
(iv)subject to the provisions of paragraph (iii) above, whether or not the rental which would be payable for the first year of the renewed term has then been determined in accordance with paragraph (ii) above, for this option of renewal to be validly exercised the Lessee must give notice in writing of its exercise of the option to the Lessor not less than three (3) months prior to the expiration of the term of this Lease in which case the annual rental payable for each year of the renewed term shall be the amount determined in accordance with paragraph (ii) above.
Scheme of cl 5.10(b) of the lease agreement
By cl 5.10(b)(i), if Whitegum intended to exercise the second option to renew it was bound to give Bernadini not less than three months, and not more than six months, written notice of its intention (the First Notice). The prescribed period for giving the First Notice was not earlier than 31 May 2009 and not later than 31 August 2009.
By cl 5.10(b)(ii), the annual rent for each year of the renewed term is to be ascertained by applying the formula specified in the provision subject, however, to the proviso that the rent for each year is not to be less than the rent payable for the then current term of the lease.
By cl 5.10(b)(iii), if, after Whitegum has given the First Notice and not less than 21 days before the date which is three months before the expiry of the then existing term (that is, not later than 10 August 2009), Whitegum and Bernadini agree in writing upon the annual rent to be payable for the first year of the new term, then Whitegum 'shall be deemed to have exercised' the second option. The effect of cl 5.10(b)(iii) is that if the conditions specified in the provision are satisfied, then:
(a)the annual rent for the first year of the renewed term, as agreed upon in writing by Whitegum and Bernadini, overrides the formula specified in cl 5.10(b)(ii); and
(b)there is a deemed exercise of the second option which overrides cl 5.10(b)(iv) (that is, it is unnecessary for Whitegum to give the further notice specified in cl 5.10(b)(iv)).
By cl 5.10(b)(iv), unless there has been a deemed exercise of the second option under cl 5.10(b)(iii), the second option will not have been validly exercised unless Whitegum has given 'notice in writing of the exercise of the option' to Bernadini not less than three months before the expiry of the then existing term (the Second Notice). In that event, the annual rent payable for each year of the renewed term is to be ascertained by applying the formula specified in cl 5.10(b)(ii). The cut‑off date for giving the Second Notice was 31 August 2009.
Material correspondence between the parties
On 25 August 2009, Whitegum sent a letter (the First Letter) to Bernadini, which reads:
WHITE GUM PETROLEUM PTY LTD
ACN 074 507 074
Level 2, 10 Ord Street
WEST PERTH WA 6005
PO Box 417, WEST PERTH WA 6872
Phone:(08) 9366 4700 Fax: (08) 9366 4704
25th August 2009
Bernadini Pty Ltd By Post and Fax: 9274-5030
Lakeside Corporate
Unit 16,
24 Parkland Road
OSBORNE PARK WA 6018Attention: Mark Quackenbush
Dear Mark,
RE:SERVICE STATION,
390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE
RENEWAL OF SECOND OPTION COMMENCING
1ST DECEMBER 2009We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.
We will contact you shortly to discuss the preparation of renewal documentation.
Please have signed and return a copy of this letter attached, to facsimile 9366-4701.
Should you have any queries please do not hesitate to contact the undersigned directly on 9366-4727.
Yours sincerely
White Gum Petroleum Pty Ltd[Signed]
Brenton Tieleman
Business Manager - PropertyBernadini received the First Letter on 25 August 2009. Attached to the First Letter was an identical copy of the letter with a provision at the bottom for a signature on behalf of Bernadini and the date.
On 26 August 2009, Whitegum sent another letter (the Second Letter) to Bernadini, which reads:
WHITE GUM PETROLEUM PTY LTD
ACN 074 507 074
Level 2, 10 Ord Street
WEST PERTH WA 6005
PO Box 417, WEST PERTH WA 6872
Phone:(08) 9366 4700 Fax: (08) 9366 4704
26th August 2009
Bernadini Pty Ltd By Post, Person and Fax: 9274-5030
Lakeside Corporate
Unit 16,
24 Parkland Road
OSBORNE PARK WA 6018Attention: Mark Quackenbush
Dear Mark,
RE:SERVICE STATION,
390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE
RENEWAL OF SECOND OPTION COMMENCING
1ST DECEMBER 2009
We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.
We will contact you shortly to discuss the preparation of renewal documentation.
Yours sincerely
White Gum Petroleum Pty Ltd[Signed]
Brenton Tieleman
Business Manager - PropertyBernadini received the Second Letter on 27 August 2009.
Whitegum contended at the trial, and reiterates in the appeal, that the First Letter constituted notice of intention to exercise the second option to renew within cl 5.10(b)(i) of the lease agreement and that the Second Letter constituted notice of exercise of the second option within cl 5.10(b)(iv).
Trial judge's reasoning
The trial judge noted that cl 5.10(b) relevantly contemplates two notices. The first, under cl 5.10(b)(i), is the notice of intention to exercise the option. The second, under cl 5.10(b)(iv), is the notice of exercise of the option [26].
According to his Honour, there were 'two key questions' in the case, namely:
(a)would a reasonable recipient of the First Letter, dated 25 August 2009, and then the Second Letter, dated the following day, understand that the lessee had sent two par (i) notices of intention on consecutive days, or that the Second Letter was, notwithstanding the language 'intention to exercise', meant as a notice of exercise under par (iv); and
(b)would the reasonable recipient be left in reasonable doubt in this regard, or was the intention revealed by the Second Letter unequivocal? [28].
His Honour said that Whitegum required favourable answers to both questions in order for its claim to succeed [29].
Bernadini submitted to the trial judge that a reasonable recipient of the Second Letter would surmise that Whitegum had decided to give a further notice of intention under cl 5.10(b)(i) without including the unnecessary request for signature and return of the letter. Whitegum's counter‑submission was that the reasonable recipient would conclude, correctly, that the request for signature and return of a copy of the First Letter was made merely to facilitate proof of service and that Whitegum would not have thought it necessary to send a replacement letter. His Honour said that there was 'some force' in the counter‑submission and 'if the question turned on which is the preferable or more likely interpretation of the Second Letter', he would answer the question in favour of Whitegum [48]. However, according to his Honour, that was not the question. Rather, 'the question is whether the Second Letter unequivocally manifests an intention to thereby exercise the option' [48]. He added that this 'returns attention to whether there is an alternative reasonable interpretation of the Second Letter' [48].
His Honour then said:
[Whitegum] submits that the same words used in the Second Letter can be construed as having a different meaning than those words in the First Letter because of the different contexts. The difference is that the Second Letter was written in the context of the First Letter having already been sent. I agree that the letters were written in different contexts in this way. However, the question is whether that different context supports a conclusion that the same words when used in the Second Letter unequivocally manifest a different meaning to the meaning conveyed by those words when used in the First Letter, one day earlier. I am not persuaded of that [49].
The trial judge explained that, in his view, 'the reasonable recipient [of the Second Letter] would have been left in some reasonable doubt' [49]. He was not satisfied that the Second Letter 'clearly and unequivocally manifests an election thereby to exercise the option' [49].
After the trial but before judgment, his Honour requested the parties to make submissions as to whether the sending of the First Letter and the Second Letter arose through 'administrative error', so that two versions were sent of what was intended to be one letter [50]. Each party filed and served supplementary written submissions in response to his Honour's request.
The trial judge noted in his reasons that Bernadini had not pleaded the hypothesis that the Second Letter was a deliberate choice to redraft the First Letter but, in his view, Bernadini was not required to plead the 'administrative error hypothesis'. According to his Honour:
In order to demonstrate that the Second Letter unequivocally manifested an intention to thereby exercise the option, it was incumbent on the lessor [sic: lessee/Whitegum] to exclude all other reasonable hypotheses about the Second Letter and to select what evidence it led accordingly [56].
However, his Honour said that it was unnecessary to express a concluded view on the point or on whether the reasonable recipient of the Second Letter might have understood it in accordance with the 'administrative error hypothesis' [57]. He concluded that:
(a)the Second Letter did not unequivocally convey the intention thereby to exercise the option; and
(b)the reasonable recipient would have been left in doubt as to whether the Second Letter was to be understood as an intended replacement of the First Letter, rather than as a notice under cl 5.10(b)(iv) [57].
Grounds of appeal
There are two grounds of appeal. Ground 1 alleges that the trial judge erred in law in failing to hold that if a hypothetical person who has received a notice in relation to an option would fairly understand the option to be exercised, then the option will have been validly exercised. Ground 2 alleges that his Honour erred in law in finding that the Second Letter did not unequivocally manifest an intention to exercise the second option to renew.
Notice of contention
Bernadini filed a notice of contention. It alleged that the trial judge should have concluded that, viewed objectively, the Second Letter was sent through administrative error 'as a repeat' of the First Letter, such that the Second Letter did not clearly and unequivocally give notice of the actual exercise of the option to renew.
Application to adduce additional evidence in the appeal
On 13 July 2010, Whitegum made application for leave to adduce additional evidence in the appeal in opposition to the matters raised by Bernadini in its notice of contention. Bernadini opposed the application.
Whitegum sought to rely on evidence in the affidavit of Mr Brenton Tieleman sworn 9 July 2010 and the affidavit of Mr Lindsay Jowett sworn 12 July 2010 in support of the proposition that Bernadini should not be permitted to rely on its notice of contention in that it raised a matter that was not litigated at the trial and about which Whitegum should have had the opportunity to call evidence for the purpose of establishing that the Second Letter was not, in fact, sent through administrative error.
On 14 July 2010, Pullin JA ordered that the application be referred to the hearing of the appeal.
At the hearing of the appeal, the court dismissed Whitegum's application. We said that reasons for decision would be published later.
Principles governing the purported exercise of an option to renew
The test for determining whether a lessee has exercised an option to renew the term of the lease is whether the purported exercise clearly and unequivocally manifests an election to enter into a lease for the renewed term in accordance with the option. See Ballas v Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193, 196 (Dixon CJ); Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192, 200 ‑ 201 (Gibbs J); Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 683 (McHugh JA). This test and its application have been elaborated upon in numerous authorities.
If the lessee sends the lessor a letter purporting to exercise the option to renew, the letter is not to be evaluated in isolation, by reference only to the words used. It must be evaluated in the context of the circumstances of its receipt, including the dealings between the parties. See Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115, 126 (Isaacs J); Prudential Assurance (677) (Kirby P).
If the lessee purports to exercise the option to renew by letter, proof of the election to enter into the lease for the renewed term depends on whether a hypothetical reasonable person who received the letter, and was aware of all the circumstances of its receipt including the dealings between the parties, would fairly understand the option to be exercised. See Jones v Daniel [1894] 2 Ch 332, 335 (Romer J); Carter (126) (Isaacs J); Prudential Assurance (683) (McHugh JA).
In Ballas (No 2), Williams J said (204 ‑ 205):
Options have been held to have been exercised, where the context is sufficient, although the document, instead of stating unequivocally that 'the optionee hereby exercises the option,' or words to that effect merely states that he desires or intends or is prepared to exercise it: Mills v Haywood ((1877) 6 Ch D 196); Nicholson v Smith ((1882) 22 Ch D 640); Collingridge v Niesmann ((1920) 37 WN (NSW) 224).
Where the lessee's letter merely states that it desires or intends to exercise the option to renew, the critical issue is whether, in the context of the circumstances of its receipt including the dealings between the parties, the lessee has clearly and unequivocally expressed its election, then and there, to acquire a new lease upon the terms of the option. See Ballas (No 2) (196 ‑ 197) (Dixon CJ).
The extensive litigation which has occurred in relation to whether options (including options to renew granted to lessees) have been validly exercised reflects, perhaps, the observation of Jordan CJ in Mackay v Wilson (1947) 47 SR (NSW) 315 that an option is 'nearly always a ticklish thing' (318). It is unprofitable, however, to review previous cases. Each case necessarily turns on the application of the settled principles I have identified to its own particular facts and circumstances, including the proper construction of the document or documents in dispute. See Prudential Assurance (674) (Kirby P).
The merits of the grounds of appeal
The First Letter is dated 25 August 2009. It was signed by Mr Tieleman on behalf of Whitegum and addressed for the attention of Mr Mark Quackenbush of Bernadini. The letter is marked 'By Post and Fax: 9274 ‑ 5030'. It was in fact received by Bernadini on 25 August 2009. See par 18 of the statement of claim read with par 2 of the defence.
The First Letter referred, in a heading about its subject matter, to the leased premises and the 'renewal of second option commencing 1st December 2009'. The first paragraph said that Whitegum 'hereby give[s] notice, in accordance with Clause 5.10, of our intention to exercise our second option'. The second paragraph noted that Whitegum would contact Bernadini shortly 'to discuss the preparation of renewal documentation'.
The third paragraph of the First Letter requested Bernadini to sign and return, by facsimile transmission, an attached copy of the letter. The attached copy made provision for a representative of Bernadini to sign and date the copy.
The fourth paragraph of the First Letter said that if Mr Quackenbush had 'any queries' he should not hesitate to contact Mr Tieleman on a specified telephone number.
The Second Letter is dated 26 August 2009. It was signed by Mr Tieleman on behalf of Whitegum and addressed for the attention of Mr Quackenbush of Bernadini. The letter is marked 'By Post, Person and Fax: 9274 ‑ 5030'. Whitegum delivered the letter to Bernadini's registered office on 27 August 2009 and Bernadini in fact received it on that date. See pars 21 and 22 of the statement of claim read with par 2 of the defence.
The Second Letter contained the same heading about its subject matter as the First Letter. The first and second paragraphs of the Second Letter are identical to the first and second paragraphs of the First Letter. In particular, the first paragraph of the Second Letter stated that Whitegum 'hereby give[s] notice, in accordance with Clause 5.10, of our intention to exercise our second option'. The Second Letter did not contain any other material provision than its heading and first and second paragraphs.
In summary, the relevant differences between the First Letter and the Second Letter are these:
(a)The First Letter is dated 25 August 2009 whereas the Second Letter is dated 26 August 2009.
(b)The First Letter was in fact received by Bernadini on 25 August 2009 whereas the Second Letter was in fact received by Bernadini on 27 August 2009.
(c)The First Letter was marked, relevantly, 'By Post and Fax' whereas the Second Letter was marked, relevantly, 'By Post, Person and Fax'.
(d)The third and fourth paragraphs of the First Letter were not reproduced in the Second Letter.
(e)The First Letter had an attachment but the Second Letter did not.
In my opinion, the First Letter was, on its proper construction, the First Notice given pursuant to, and in accordance with, cl 5.10(b)(i). Whitegum's request in the third paragraph of the First Letter that Bernadini sign and return, by facsimile transmission, the attached copy of the letter did not destroy or impair its efficacy as a notice under cl 5.10(b)(i). A hypothetical reasonable person who received the First Letter would have understood that Whitegum's request was made merely for the purpose of facilitating proof of Bernadini's receipt of the letter. There was no attempt to vary the terms of the second option. The First Letter was clearly and unequivocally the First Notice.
If that part of the Second Letter which states that Whitegum 'hereby give[s] notice, in accordance with Clause 5.10, of our intention to exercise our second option' were to be read in isolation, I would conclude that the letter did not clearly and unequivocally express an election by Whitegum, then and there, to acquire a new lease upon the terms of the second option. However, the Second Letter is not to be read in isolation. Its form and content must be evaluated in the context of the circumstances of its receipt, including the dealings between the parties.
The relevant circumstances of the Second Letter's receipt include the following:
(a)The provisions of the First Letter, its date, and the date of its receipt in fact by Bernadini.
(b)The date of the Second Letter, and the date of its receipt in fact by Bernadini.
(c)The relevant differences between the First Letter and the Second Letter. See [44] above.
(d)The date of Bernadini's receipt of the First Letter, namely 25 August 2009, being six days before the cut‑off date under cl 5.10(b)(iv).
(e)The date of Bernadini's receipt of the Second Letter, namely 27 August 2009, being four days before the cut‑off date under cl 5.10(b)(iv).
(f)The status of the First Letter as the First Notice given pursuant to, and in accordance with, cl 5.10(b)(i).
(g)Clause 5.10(b)(iii) did not apply in that Whitegum did not give the First Notice to Bernadini until after 10 August 2009.
(h)The First Letter and the Second Letter were signed by Mr Tieleman. They were not signed or sent by a lawyer.
(i)At all material times, Whitegum was carrying on the business of operating a petrol station on the leased premises. See par 1(b) of the statement of claim read with par 1(1) of the defence.
The critical question in relation to the Second Letter is whether a hypothetical reasonable person who received the letter, and was aware of the circumstances of its receipt including the dealings between the parties, would fairly understand Whitegum to have elected, then and there, to acquire a new lease on the terms of the second option. The validity of Whitegum's purported exercise of the option depends on whether the hypothetical reasonable person would have had that understanding or not. If the hypothetical reasonable person would have had the requisite understanding then Whitegum validly exercised the option.
In my opinion, a hypothetical reasonable person who received the Second Letter, and was aware of the circumstances of its receipt including the dealings between the parties, would fairly understand Whitegum to have elected, then and there, to acquire a new lease on the terms of the second option. Several points are, in combination, decisive.
First, cl 5.10 does not prescribe any particular form for exercising the second option. The option was therefore not within the category of options where strict compliance with prescribed formalities is required.
Secondly, the evident purpose of the First Notice was to inform Bernadini that Whitegum was intending (but had not yet bound itself) to exercise the second option. The evident purpose of the Second Notice was to inform Bernadini that Whitegum had elected to exercise the option.
Thirdly, the hypothetical reasonable person must be taken to have understood that the First Letter was given pursuant to, and in accordance with, cl 5.10(b)(i).
Fourthly, although the Second Letter contains the words 'hereby give[s] notice … of our intention to exercise our second option', rather than the words 'hereby exercises … our second option', the hypothetical reasonable person would be left in no reasonable doubt that Whitegum was, then and there, binding itself to acquire a new lease on the terms of the second option. The hypothetical reasonable person would be left in no reasonable doubt because:
(a)Whitegum had already, by the First Letter, given notice of its intention to exercise the second option pursuant to, and in accordance with, cl 5.10(b)(i).
(b)There was no reasonable basis for supposing that Whitegum might have sent the Second Letter as a substitute or additional First Notice under cl 5.10(b)(i). See [45] above.
(c)The Second Letter was relevantly different from the First Letter, as set out at [44] above, and the hypothetical reasonable person would understand from those differences, and the requirement under cl 5.10 that a Second Notice be given by 31 August 2009, that Whitegum had inadvertently included the words 'notice … of our intention to exercise' rather than the words 'notice of exercise'.
If the position of the parties were reversed and Bernadini was seeking to enforce the second option against Whitegum, Whitegum could not deny successfully that it had exercised the option.
In my respectful opinion, the trial judge misconstrued the Second Letter and arrived at the incorrect conclusion. His Honour's division of the applicable test into a two‑stage process, with two distinct questions to be addressed, appears to have imposed a greater burden on Whitegum than that inherent in the critical question I have formulated in accordance with the settled principles. See [48] above. Also, his Honour appears not to have accorded adequate weight to the circumstances of receipt of the Second Letter including the dealings between the parties.
The grounds of appeal have been made out.
The notice of contention and the application to adduce additional evidence
Whitegum's application to adduce additional evidence in the appeal was misconceived. The applicable test for determining whether an option to renew has been validly exercised or not is objective in character. It turns on what would be understood by a hypothetical reasonable person. The subjective intention of the lessee in relation to a notice which it alleges constituted a notice of exercise of the option is irrelevant. See Prudential Assurance, where Kirby P said:
What is in issue is whether, objectively, a reasonable person receiving that letter and reading all of it against the background of the dealings between the parties would, objectively speaking, draw the conclusion that the option was being exercised or not (678).
For these reasons, I joined in making the order of the court dismissing Whitegum's application.
I am satisfied that there is no merit in Bernadini's notice of contention. There are material differences between the language of the First Letter and that of the Second Letter. Mr Tieleman signed both letters, on consecutive days. The only reasonable inference, based on the textual differences between the letters, is that Mr Tieleman deliberately changed the wording. In the circumstances, there is no reasonable basis for inferring that Mr Tieleman sent the Second Letter as a result of an 'administrative error' on his part. It should be concluded that Mr Tieleman made a deliberate decision to send the Second Letter as the Second Notice under cl 5.10(b)(iv).
The notice of contention should be dismissed.
Conclusion
I would allow the appeal. Counsel should be heard as to the appropriate form of the orders.
NEWNES JA: This is an appeal from a decision of Beech J dismissing the appellant's claim for a declaration that it validly exercised an option of renewal of a lease, and upholding the respondent's counterclaim for possession of the leased land: Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASC 108.
Background
The trial was conducted on agreed facts and the relevant facts can be shortly stated.
In 1997 Bongiovanni Nominees Pty Ltd leased to the appellant the land which is the subject of these proceedings. Subsequently the respondent purchased the land from Bongiovanni Nominees and thereby became bound by the lease.
The lease was for an initial term of seven years, commencing on 1 December 1997 and expiring on 1 December 2004. The lease provided, by cl 5.10, for three further option periods of five years each. The terms upon which, and the manner in which, the option of renewal was to be exercised was identical in each instance. The first option was validly exercised, and the first option period expired on 1 December 2009. The issue before the primary judge was whether the second option had been validly exercised.
Clause 5.10(b) of the lease dealt with the second option and, so far as relevant, provided:
(b)That the Lessee, having exercised the first option of renewal contained in the preceding sub-paragraph hereof and not being in breach of any of the covenants and conditions on the Lessee's part herein contained at the time of the giving of the Notice of Intention as hereinafter provided, shall have the option of renewing this lease for a further term of five (5) years from the expiration of the first renewed term on the same terms covenants and conditions herein contained (save and except any option of renewal) as follows:
(i)if the Lessee intends to exercise this option of renewal it shall give to the Lessor not less than (3) months' and not more than six (6) months' notice in writing of its intention (herein called 'the Notice of Intention');
(ii)for each year of the renewed term, the annual rental shall be determined at a rate established by multiplying the then current annual rental by the relevant Variation Factor (as hereinbefore defined); provided further that the rent so determined shall not be less than the rent payable by the Lessee for the then current term of the Lease.
(iii)if following the giving of the Notice of Intention and not less than twenty‑one (21) days prior to the date which is three (3) months' prior to the expiration of the term of this Lease, the Lessor and the Lessee agree in writing the annual rental which would be payable for the first year of the renewed term then the Lessee shall be deemed to have exercised this option of renewal;
(iv)subject to the provisions of paragraph (iii) above, whether or not the rental which would be payable for the first year of the renewed term has then been determined in accordance with paragraph (ii) above, for this option of renewal to be validly exercised the Lessee must give notice in writing of its exercise of the option to the Lessor not less than three (3) months prior to the expiration of the term of this Lease in which case the annual rental payable for each year of the renewed term shall be the amount determined in accordance with paragraph (ii) above.
Clause 5.10(b) therefore required two notices to be given by the appellant in order to exercise the option of renewal: a notice of the appellant's intention to exercise the option under par (i), and a subsequent notice of the appellant's exercise of the option under par (iv).
The purpose of that requirement appears to have been to enable negotiations to take place to attempt to determine the rent for the renewed term pursuant to cl 5.10(b)(iii). If such agreement was reached the notice of exercise of the option under cl 5.10(b)(iv) did not have to be given. But agreement had to be reached not less than 21 days prior to the three‑month period leading up to the expiration of the term, in this case not less than 21 days prior to 1 September 2009. As it turned out, the notice under cl 5.10(b)(i) was given by the appellant less than 21 days prior to 1 September 2009, so a notice under cl 5.10(b)(iv) was required in order to exercise the option. The last date for the giving of the notice under cl 5.10(b)(iv) was 1 September 2009.
On 25 August 2009, the appellant sent the respondent a letter (the first letter) stating its intention to exercise the second option. It was in the following terms:
25th August 2009
Bernadini Pty Ltd By Post and Fax: [number]
Lakeside Corporate
Unit 16,
24 Parkland RoadOSBORNE PARK WA 6018
Attention: Mark Quackenbush
Dear Mark,
RE: SERVICE STATION,
390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE
RENEWAL OF SECOND OPTION COMMENCING 1ST DECEMBER 2009
We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.
We will contact you shortly to discuss the preparation of renewal documentation.
Please have signed and return a copy of this letter attached, to facsimile [number].
Should you have any queries please do not hesitate to contact the undersigned directly on [number].
Yours sincerely
White Gum Petroleum Pty Ltd
[Signed]
Brenton Tieleman
Business Manager - Property
A copy of the letter was attached, with provision at the bottom of the copy for a signature on behalf of Bernadini Pty Ltd and the date to be inserted.
The lessor received the first letter on 25 August 2009. It was not in issue that the first letter fulfilled the requirements of cl 5.10(b)(i).
The following day, 26 August 2009, the appellant send the respondent a further letter (the second letter). It was as follows:
26th August 2009
Bernadini Pty Ltd By Post, Person and Fax: [number]
Lakeside Corporate
Unit 16,
24 Parkland RoadOSBORNE PARK WA 6018
Attention: Mark Quackenbush
Dear Mark,
RE: SERVICE STATION,
390 NICHOLSON RD (CNR ARMADALE RD), FORRESTDALE
RENEWAL OF SECOND OPTION COMMENCING 1ST DECEMBER 2009
We refer to previous discussions and the lease over the above named premises and hereby give notice, in accordance with Clause 5.10, of our intention to exercise our second option for a term of five (5) years commencing 1st December 2009.
We will contact you shortly to discuss the preparation of renewal documentation.
Yours sincerely
White Gum Petroleum Pty Ltd
[Signed]
Brenton Tieleman
Business Manager - Property
The lessor received the second letter on 27 August 2009.
As is apparent, the second letter was in the same terms as the first letter, except that it did not contain the final two paragraphs of the first letter. The second letter was also endorsed 'By post, person and fax' whereas the first letter was endorsed 'By post and fax'.
I should say that there was no evidence of the discussions between the parties which are referred to in the first paragraph of both letters.
The only issue before the primary judge was whether the second letter satisfied the requirements of cl 5.10(b)(iv) of the lease, with the result that the option was validly exercised.
Decision of the primary judge
The primary judge referred to the well‑known passage in the judgment of Dixon CJ in Ballas v Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193, 196, that the test of whether a party to a lease has exercised an option of renewal is whether the purported exercise clearly and unequivocally manifests an election thereby to do so. His Honour went on to say that, viewed objectively, a notice purporting to exercise an option must be sufficiently clear to leave the recipient in no reasonable doubt that it was intended thereby to exercise the option [17]. He said the question was, taking into account the surrounding circumstances, would a reasonable recipient having knowledge of the terms of the contract fairly understand the option to be exercised [19].
A little later in his reasons, the primary judge said:
To my mind, there are two key questions in this case:
(a)would a reasonable recipient of the First Letter, dated 25 August 2009, and then the Second Letter, dated the following day, understand that the lessee had sent two par (i) notices of intention on consecutive days, or that the Second Letter was, notwithstanding the language 'intention to exercise', meant as a notice of exercise under par (iv); and
(b)would the reasonable recipient be left in reasonable doubt in this regard, or was the intention revealed by the Second Letter unequivocal?
The lessee requires favourable answers to both these questions in order to succeed in its claim [28] ‑ [29].
The primary judge considered that other cases where it had been found that the expression of an intention to exercise an option was effective to exercise the option were of limited assistance because in none of those cases was there a requirement, before exercising the option, to give a separate notice of an intention to do so. Accordingly, in those cases there was no other reasonable interpretation of a document stating an intention to exercise the option but as an exercise of the option [39] ‑ [40].
The primary judge acknowledged there was force in the appellant's contention that the request in the first letter for return of a signed copy did not go to the efficacy of the letter but to remove any doubt about service, and therefore it was unlikely the appellant would have felt the need to send the second letter to replace the first letter. His Honour observed, however, that people may act from an excess of caution. The primary judge went on to say:
If the question turned on which is the preferable or more likely interpretation of the Second Letter, I would answer the question in favour of the lessee. However, that is not the question. Rather, the question is whether the Second Letter unequivocally manifests an intention to thereby exercise the option. That returns attention to whether there is an alternative reasonable interpretation of the Second Letter [48].
As I understand his Honour's reasons, he thus rejected any suggestion that the case turned on whether or not the preferable view of the second letter was that it was the exercise of the option. He concluded that the real question was simply whether or not, in the circumstances, the second letter would reasonably have been understood as a clear and unequivocal exercise of the option. That, his Honour considered, directed attention to whether there was a reasonable alternative interpretation of the second letter. The primary judge continued:
The lessee submits that the same words used in the Second Letter can be construed as having a different meaning than those words in the First Letter because of the different contexts. The difference is that the Second Letter was written in the context of the First Letter having already been sent. I agree that the letters were written in different contexts in this way. However, the question is whether that different context supports a conclusion that the same words when used in the Second Letter unequivocally manifest a different meaning to the meaning conveyed by those words when used in the First Letter, one day earlier. I am not persuaded of that. To my mind, taking into account the considerations I have mentioned, the reasonable recipient would have been left in some reasonable doubt. Essentially for the reasons submitted by the lessor, I am not persuaded that the Second Letter clearly and unequivocally manifests an election thereby to exercise the option [49].
The primary judge then turned to a hypothesis he had raised at the hearing, namely that an administrative error had led to the appellant sending two letters pursuant to cl 5.10(b)(i). After the hearing, the parties were invited to provide submissions on that hypothesis. In its submissions, the appellant objected to the hypothesis being relied upon unless evidence of a conversation between an officer of the appellant and an officer of the respondent was admitted. The appellant also complained that the respondent had not pleaded an administrative error. The primary judge found that the respondent was not required to plead it.
His Honour concluded, however, that it was not necessary to consider whether a reasonable recipient might have understood the second letter in that way. That was because, his Honour explained, the second letter did not unequivocally convey the intention thereby to exercise the option, with the result that the reasonable recipient would have been left in doubt as to whether the second letter was to be understood as an intended replacement of the first letter, rather than as a notice under cl 5.10(b)(iv) [57].
The primary judge accordingly dismissed the appellant's claim for a declaration that it had exercised the second option of renewal of the lease.
Grounds of appeal
The appellant relied upon the following grounds of appeal:
1.The trial judge erred in law in that he failed to hold that if a hypothetical person who has received a notice in relation to an option would fairly understand the option to be exercised, then the option will have been validly exercised. The trial judge should have so held, and having regard to his finding that the preferable or more likely interpretation by a reasonable recipient of the appellant's letter dated 26 August 2009 was that the appellant had exercised its option to renew its lease with the respondent, the trial judge should have held that the appellant had validly exercised its option.
2.The trial judge erred in law in finding that the appellant's letter dated 26 August 2009 did not unequivocally manifest an intention to exercise its option to renew its lease with the respondent. The trial judge should have found that the appellant's letter dated 26 August 2006 did unequivocally manifest an intention to exercise its option to renew its lease with the respondent.
The appellant's case
It was accepted by counsel for the appellant that the primary judge had correctly stated the general test, as enunciated by Dixon CJ in Ballas v Theophilos, that whether a lessee has exercised an option of renewal depends on whether the purported exercise clearly and unequivocally manifests an intention to do so. But it was submitted that in determining whether a particular communication is effective to exercise the option, the question that has to be asked is whether, in all the circumstances of its receipt, a reasonable recipient of the communication would fairly understand the option to be exercised. Counsel argued that whilst the primary judge had referred to that test, he had not applied it to the facts of the case. Had he done so, it was submitted, his conclusion that the appellant's construction of the second letter was the preferable and more likely interpretation would have dictated a finding for the appellant.
Counsel for the appellant argued that the view of the primary judge that a reasonable recipient might have considered that the second letter was sent out of an abundance of caution to avoid the possibility that the first letter was not legally effective, was not a reasonable possibility. There was no reasonable basis for the respondent to have considered that the appellant might be concerned that the first letter was not legally effective. The request, omitted from the second letter, to return a signed copy obviously related to proof of service. As the possibility suggested by the primary judge did not arise, the only explanation for the second letter could be that it was the exercise of the option. The proximity in time, the common signatory and the difference in the terms of the two letters excluded an administrative error as an explanation for the second letter.
The respondent's case
The respondent did not contest that the relevant test is whether, in all the circumstances, the relevant communication clearly and unequivocally indicated to a reasonable recipient that the option had been exercised. But it was submitted that the second letter did not so indicate. The lease specified that two distinct steps must be taken, involving two different concepts ‑ one, an intention to renew and the other, an actual renewal. Precisely the same words stating in their terms an intention to renew would not be understood by a reasonable recipient to bear those two quite different meanings. There was nothing in the letters to suggest they should be understood in different ways. The fact that the second letter came after the first letter does not mean that the second letter must be understood as the exercise of the option. Whether it did or did not depends upon the terms of the letter and all of the relevant circumstances.
In this case, the lease required both an expression of intention and an actual exercise of the option. The second letter expressed an intention to exercise the option in identical terms to the first letter, and there was nothing to indicate that that 'intention' was to be understood in different ways in the two letters. Accordingly, a reasonable recipient would have been left in doubt as to whether or not the second letter was an exercise of the option.
It was submitted that the relevant test did not involve enquiry as to whether there was a reasonably available alternative explanation for the second letter. Viewed objectively, there could be a number of possible reasons, rational or irrational, for the second letter. It is not a matter of determining subjectively why the appellant might have sent the second letter and it is not necessary for the respondent to show there is some other reasonable explanation for it. The question is simply whether it would have conveyed clearly and unambiguously to a reasonable recipient that it was an exercise of the option. In this case it did not.
Disposition of the appeal
The test of whether a party to a lease has exercised an option to renew the lease is whether the relevant communication clearly and unequivocally expressed the fact that the option was thereby exercised: Ballas v Theophilos (196); Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 683.
In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, the House of Lords discussed the approach to be taken in respect of a unilateral notice such as the exercise of an option. That case was concerned with whether notices given under a 'break clause' in a lease were valid but, in a speech which has been frequently cited with approval in Australia, Lord Steyn described the same principles as being applicable to any unilateral notice served under a contractual right reserved where there is no stipulation that the notice must contain specific information in order to be effective (768). Lord Steyn said the correct approach is as follows:
The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene … It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases … Even if such notices under contractual rights reserved contain errors they may be valid if they are 'sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate' ... That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. It acknowledges the importance of such notices.
…
I would hold that the correct test for the validity of a notice is that posed by Goulding J in Carradine Properties Ltd v Aslam [1976] 1 WLR 442, 444: 'Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?'.
…
That test can only be satisfied where the reasonable recipient could be left in no doubt whatever. It is in accord with business common sense that in cases where that simple and straightforward test is satisfied the notices should be treated as valid (767 ‑ 773).
In construing such a notice it is not a proper approach to subject the terms of the notice to technical interpretations or place undue emphasis on niceties of language: Mannai Investment v Eagle Star Life Assurance (771); Prudential Assurance Co v Health Minders (678); Bava Holdings Pty Ltd v Pando Holdings Pty Ltd (1998) NSW ConvR 55‑862. Where a notice contains some inaccuracy, obvious error or looseness of expression, the question remains, how would the recipient as a reasonable commercial person have understood the intent of the notice?
But equally it is clear that while absolute clarity of expression is not required, the terms of a contractual notice must be sufficiently clear and unambiguous to leave the reasonable recipient in no doubt that the option is being exercised. Otherwise, as Isaacs J asked in Ex parte Callan; Re Smith (1968) 87 WN (Pt 1) (NSW) 595, in relation to uncertainty on the face of a notice to quit as to the authority of the person issuing it,
how then can the tenant know with certainty whether he can or cannot act upon it? (604)
As the test is an objective one, the question as to its meaning is not to be determined by how in fact the recipient understood the notice: Mannai Investment v Eagle Star Life Assurance (767). (For a discussion of the difficulties inherent in taking into account the reaction of a recipient, see Lancecrest Ltd v Asiwaju [2005] EWCA Civ 117 [38] ‑ [43], [88].) And if a reasonable recipient would have a reasonable doubt as to its meaning, it is not sufficient that such a recipient might have favoured one particular meaning over another. In Catley v Watson (1981) V ConvR 54‑003, a case involving a default notice under a provision ('copyright condition 5') in a contract for the sale of land, Brooking J said:
In my opinion, a notice under copyright condition 5 is not valid unless it is, in relation to its essential features as required by that condition, clear and unambiguous. By this I mean, not that its import must be clear beyond the slightest peradventure, but that its terms must be such that a reasonable person, having given it fair and proper consideration, would be left in no doubt as to its meaning. A notice is not unequivocal, in the sense in which such notices are required to be unequivocal in relation to their essential contents, if a reasonable person, having considered the notice as a whole, fairly and properly, might entertain a doubt as to its meaning in relation to some essential matter, even though he would form in his mind a preference for one view, rather than the other of what the notice was intended to convey. It must be possible to say that, after the appropriate consideration, any doubts that may have arisen would have been quieted and the purchaser would not be left in any uncertainty as to the meaning of the notice … (62,115). (emphasis added)
That passage has been referred to with approval in a number of cases. It is clear, however, that any doubt which remains must be a reasonable doubt and the 'reasonable reader' must be a reasonable reader in the position of the purchaser who has knowledge of the terms of the contract and of the surrounding circumstances: see Central Pacific (Campus) Pty Ltd v Staged Developments Australia Pty Ltd (1998) V ConvR 54‑575; Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27; (2003) V ConvR 54‑680; MLW Technology Pty Ltd v May [2005] VSCA 29.
There are a number of cases where a document expressed in terms of an intention to exercise an option has been found to be an actual exercise of the option, the document otherwise being inexplicable as it could serve no possible purpose. The primary judge referred to some of those cases at [41] of his reasons. But in my respectful view his Honour rightly viewed those decisions as of limited assistance in the present case as in none of them was there an express antecedent requirement to give notice of an intention to exercise the option. Counsel for the appellant acknowledged that he was unable to refer to any case where such a finding had been made in circumstances where, before the option was exercised, a separate notice had to be given of an intention to exercise the option. Indeed, neither counsel was able to refer us to any case where a similar two step procedure had been required. My own research has been no more fruitful.
As I understand his Honour's reasons, he decided the case on the basis that the second letter failed to manifest a clear and unequivocal election to exercise the option. He concluded that it was not the case that the only reasonable explanation for the second letter was that it constituted the exercise of the option. There were alternative explanations available, including the possibilities that it resulted from an excess of caution on the appellant's part arising from concerns about the legal efficacy of the first letter or that it was sent as a result of some administrative error. Accordingly, a reasonable recipient would have been left in doubt as to what was intended by it.
It was not, in his Honour's view, necessary to determine whether a reasonable recipient would actually have understood the second letter to be for one or other of those reasons, or for some other specific, identified reason. It was sufficient that the recipient would have been left in a state of doubt as to whether the second letter was intended to be an exercise of the option.
In the end, I am not persuaded that his Honour was in error in concluding that the second notice was not a valid exercise of the option. A reasonable recipient would have been aware of the requirement in the lease that the appellant had to give the two separate notices in order to exercise the option. That does not mean, however, that the second letter, simply by virtue of coming after the first letter, would be understood by a reasonable recipient as constituting a notice of exercise of the option. The language of the second letter cannot be ignored.
While it is the case that the second letter is not to be examined with any presumption as to the precision of its language, it is significant that the appellant was required to take two distinct and separate steps; it had to give notice of an intention to exercise the option and it had to give notice of exercise of the option. It sent a notice expressed in terms of its intention by letter dated 25 August 2009. It sent another letter dated 26 August 2009 expressed in identical terms, save for the omission of the request to the respondent to sign and return a copy of the letter. In the second letter, no reference was made to the first letter.
In the circumstances, I do not consider that, viewed objectively, the second letter clearly and unequivocally conveyed the fact that it was intended to be an exercise of the option. It was couched in terms of cl 5.10(b)(i) although the requirements of cl 5.10(b) clearly involve two distinct and conceptually different steps. It appears on its face to be a repeat of the first letter but with the omission of the request for the return of a signed copy. It contains nothing which might suggest that it is to serve some function different from or additional to the first letter. There were, as the primary judge observed, other possible explanations for the appellant serving another notice of its intention to exercise the option. A reasonable recipient, aware of the terms of the lease, would have been left in a state of uncertainty as to what purpose it was intended to serve. In my opinion, it was not, therefore, effective to exercise the option.
I consider that the grounds of appeal have not been made out and I would dismiss the appeal.
The notice of contention and the appellant's application to adduce additional evidence
The respondent filed a notice of contention as follows:
In the alternative … the trial judge could have concluded that the second letter of 26 August 2009 was, viewed objectively, sent through administrative error as a repeat of the first letter of 25 August 2009 such that the second letter did not clearly and unequivocally give notice of the actual exercise of the second option.
The appellant sought leave to adduce additional evidence on the appeal in answer to the notice of contention. The evidence was contained in two affidavits. One was an affidavit sworn 12 July 2010 by Mr Jowett, an employee of a company associated with the appellant, who manages the leasehold interests of the appellant and associated companies. Mr Jowett described the sending of the two letters and a telephone conversation he said he had with Mr Quackenbush, of the respondent, on 25 August 2009, after service of the first letter. The other was an affidavit sworn 9 July 2010 by Mr Tieleman, the assistant to Mr Jowett and the signatory to the two letters, who also described the sending of the two letters and a telephone conversation he said he had with Mr Quackenbush on 26 August 2009, after service of the first letter and before dispatch of the second letter.
The evidence was said to be relevant as part of the context of the two letters. Counsel for the appellant submitted that it was not adduced at the trial because the issue of an administrative error was raised by the primary judge after the case had been argued, but said that if the issue had been raised earlier the evidence would have been adduced. The purpose of raising it was to demonstrate that the respondent could not now rely on the notice of contention as that would, in effect, be to seek to raise a new point on the appeal on which evidence could and would have been led below.
If leave was granted, the respondent sought to rely on an affidavit of Mr Quackenbush sworn on 27 July 2010, in which Mr Quackenbush disputed the content of the telephone calls as described by Mr Jowett and Mr Tieleman. Mr Quackenbush also deposed to his belief as to the purpose of the second letter.
At the hearing of the appeal, the appellant's application was refused. We said that we would provide reasons for our decision. My reasons, which can be shortly stated, are as follows.
The court undoubtedly has a discretion to receive additional evidence on an appeal: r 47(3)(d) of the Supreme Court (Court of Appeal) Rules 2005 (WA). But whilst that discretion is not confined to the common law rules governing the admission of fresh evidence, the rule should not be construed in a way which would have the practical effect of obliterating the distinction between original and appellate jurisdictions. The discretion to admit additional evidence exists to serve the demands of justice. Ordinarily additional evidence will not be admitted unless the court is satisfied it would have produced a different result if it had been available at the trial. If it was available, or could by reasonable diligence have been made available, at the trial, that will be a factor weighing against the exercise of the discretion. If it was deliberately withheld at the
trial, that will ordinarily weigh heavily against the exercise of the discretion. See Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10; (2007) 33 WAR 182 [9] ‑ [12].
The case below was tried on agreed facts. The question of whether the second letter was sent as the result of an administrative error, whilst not expressly raised in the pleadings, was an issue which was open on the pleadings and, as the primary judge found, did not have to be expressly pleaded. The evidence of Mr Jowett and Mr Tieleman was clearly available to the appellant. If it was considered to be relevant to the context in which the second letter was to be construed it was open to the appellant to seek to adduce the evidence at trial. The appellant did not do so. In the circumstances, I considered that the application should be refused. It is unnecessary to consider the admissibility of the evidence.
In light of my conclusion on the appeal it is unnecessary to consider the notice of contention.
Conclusion
It follows that I would:
1.dismiss the appeal; and
2,dismiss the notice of contention.
MURPHY JA: I agree with Buss JA.
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