WM George Pty Ltd v Kings Parking Corporate Pty Ltd
[2004] QSC 61
•26 March 2004
SUPREME COURT OF QUEENSLAND
CITATION:
WM George Pty Ltd v Kings Parking Corporate Pty Ltd [2004] QSC 061
PARTIES:
WM GEORGE PTY LTD ACN 009 831 038 as trustee
(applicant)
v
KINGS PARKING CORPORATE PTY LTD
ACN 010 709 065
(respondent)FILE NO:
SC No 1809 of 2004
DIVISION:
Trial
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
26 March 2004
DELIVERED AT:
Brisbane
HEARING DATE:
4 March, 5 March, 10 March 2004
JUDGE:
Mackenzie J
ORDER:
1. The respondent deliver up possession of the property being the whole of the land situated at 43 Herschel Street, Brisbane and described as Lot 5 on RP 813314, County of Stanley, Parish of North Brisbane, title reference 50079512.
2. The caveat lodged in respect of the land by the respondent, namely a caveat with the dealing number 707499633 be removed forthwith.
3. The respondent pay the costs of and incidental to the application to be assessed.
CATCHWORDS:
LANDLORD AND TENANT – AGREEMENT FOR LEASE – GENERALLY – whether negotiations resulted in concluded agreement
CONVEYANCING – LAND TITLES UNDER THE TORRENS SYSTEM – CAVEATS AGAINST DEALINGS – LASPSE, REMOVAL AND WITHDRAWAL – REMOVAL – where agreement relied on not proved
Property Law Act (Qld), 1974 s 131
Ermogenous v Greek Orthodox Community of SA Inc (2001) 201 CLR 95, cited
Masters v Cameron (1954) 91 CLR 353, citedCOUNSEL:
P W Hackett for the applicant
P H Morrison QC for the respondentSOLICITORS:
N R Barbi for the applicant
Gadens Lawyers for the respondent
MACKENZIE J: This is an application by the owner of land currently used as a commercial car park in Herschel Street, Brisbane for an order that the respondent deliver up possession of the land and for removal of a caveat lodged in respect of the land. The land was leased to the respondent from 13 October 1997 for 6 years. Since then the respondent has remained in possession, according to the applicant as tenant from month to month, and according to the respondent from 12 October 2003 pursuant to a lease for a 5 year term agreed on by the applicant and the respondent on or about 31 October 2003, coupled with part performance. A caveat relying on grounds of an agreement for renewal of an existing registered lease on amended terms as agreed, part performance of the agreement and prevention of lodgement of an adverse claim for possession by a third party, was lodged on 23 February 2004. Notice under s 131 of the Property Law Act 1974 was served on or about 7 January 2004, the day after a formal lease was signed with a competitor of the respondent.
The applicant submits that no agreement was reached since there were outstanding matters of principle yet to be finalised and that, in any event, the negotiations had been terminated on 28 October 2003 at the time when Mr George on behalf of the applicant had informed Mr Walker on behalf of the respondent that a better offer had been received and Mr Walker indicated that that offer would not be accepted. The respondent’s position is that a contract in the first category described in Masters v Cameron (1954) 91 CLR 353 had been formed.
It is necessary to analyse the discussions and correspondence in detail to determine whether a binding agreement had been reached by the parties. It should be observed that Mr George’s ability to recall dates when relevant conversations happened and the detail of their content was very limited. He was not in the habit of keeping notes of such conversations. He attributed this to his background originally being in the fruit and vegetable industry. More surprisingly, the solicitor principally responsible for dealing with Mr George as a client with respect to the transaction on a day to day basis did not make file notes of his conversations with Mr George, or of his instructions.
Mr Walker who conducted the negotiations on behalf of the respondent did keep a record in abbreviated form of some conversations and the solicitor dealing with the matter on the respondent’s behalf kept notes of relevant conversations, principally with Mr Walker and the solicitor acting for the applicant. In assessing the reliability of oral evidence concerning conversations I have had regard to those circumstances. However there was a good deal of correspondence between the parties which provides tangible evidence of the discussions and the state of negotiations at various times. They provide a structure within which the other evidence can be assessed.
There is evidence that a decision was taken in May 2003 not to clarify with the Brisbane City Council the status of approval of the use of the land as a car park. According to Mr George, this issue had emerged the year before in the context of an attempt by the respondent to reduce the rental under the six year lease then operative. If a notice to show cause was issued by the BCC, it would be the applicant’s responsibility to take action to dispute the decision. If the action was unsuccessful, or if the respondent decided not to challenge the decision, provision would be made for the respondent to avoid the lease.
On 20 June 2003 a proposal was put to the applicant that because the car park was losing money and its future prospects were uncertain, the respondent would continue to operate it at a reduced rental but share profits from revenue exceeding that for the year ending 30 June 2003 with the applicant. A rental of $225,000 per annum escalated at the lower of CPI or the total percentage revenue change was proposed. Other matters mentioned as the basis of the offer were the profit sharing arrangement and, under the heading “other”, the following:
“ 3.1 general basis discussed by solicitors
3.2 redevelopment clause – 6 months notice
3.3 other normal leasing terms”The reference to the respondent’s understanding that “there was agreement on the general basis on which a new leasing arrangement could be contemplated” shows that at that point, only a preliminary stage had been reached.
After the beginning of September 2003 there are documents recording, with reference to the letter of 20 June 2003, the respondent’s understanding of the outcome of discussions with Mr George which included:
(a) Rental would be $260,000 per annum;
(b)The escalator was yet to be determined although the respondent was contending for CPI;
(c)There would not be profit sharing.
On 12 September 2003 a draft lease was sent by the solicitors for the applicant, accompanied by advice that the client had not had the opportunity to peruse it and while changes were not expected the client’s right to request changes was reserved. In response on 23 September 2003 the respondent’s solicitors raised a number of issues with respect to drafting of varying degrees of substance. Relevantly for the main thrust of the case, provisions dealing with the redevelopment clause and the right to terminate the lease if use as a car park was terminated by the BCC were not included and the need for guarantors and the basis of rent review remained to be settled.
On 1 October 2003, a letter was sent to Mr George seeking his agreement or disagreement with the respondent’s requests for amendments. The four matters raised were:
(a) CPI based, not fixed rate, review of rent;
(b) No requirement for guarantors;
(c) Right of first refusal if any redevelopment included a car park;
(d) A show cause provision of the kind referred to above.
Mr George did not accept (a), (b) and (d) but agreed to (c).
The reply on 10 October 2003 advised that the applicant maintained that a fixed annual rent review of 4% was required. The respondent’s position that the provision of guarantors should be marked “not applicable” was “not agreed” (Mr George gave evidence at T34-35 why he was inclined to require guarantees). It was said that the applicant did not agree to a provision giving the right to terminate if the show cause notice was issued. The right of the applicant to make changes was again reserved.
On the same day the respondent’s solicitor forwarded the letter to the respondent, particularly noting that the applicant would not agree to the show cause clause. Mr Walker replied to her, saying “That issue is crucial. There is no point in me responding until it is resolved.”. A file note by the respondent’s solicitor dated 17 October 2003 with respect to a conversation with Mr Walker in which he expressed the opinion that there had been a misconception on Mr George’s part that the respondent had drafted a clause and that Mr George thought that he did not disagree in principle as to the inclusion of such a clause. On 17 October 2003 Mr Walker sent her an email asserting that there was agreement on the principle of a show cause clause.
However, Mr Walker said the escalation clause was yet to be agreed. He said that he had not signed off on it but it was likely to be 4%. He said he would let his solicitor know. The solicitor emailed the substance of the email to the applicant’s solicitor on 21 October 2003 and asked for confirmation of the client’s agreement to a clause based on her understanding of the principle which was to govern it. She asked the solicitor for the applicant to draft the clause for consideration.
The conversation of 17 October 2003 assumed major importance for the respondent, because it was its case that Mr George made an agreement during it that the terms of the new agreement (except insofar as specific variations had been agreed upon) would be the same as the previous one. This was one of the conversations where Mr George’s recollection was all but non-existent, but he expressed the opinion that he would not have said it because the 1997 agreement would not have suited him.
Mr Walker’s recollection was that the show cause issue was discussed and also the escalation clause. He said that Mr George was insisting on 4%. Mr Walker told him he would have to take it on board. Mr Walker’s statement proceeds:
“George sounded to me as if he was getting a little irritated and he told me that he wanted the agreement to be the same as it was before. This was acceptable to Kings as at that stage the only remaining issue was my confirming agreement on the rent escalator.”
Two points were made by the applicant in this connection. The first was that, if the words about the agreement were said, they were said in relation to the escalation clause. The other was that they did not amount to an agreement.
A file note dated 29 October 2003 by the respondent’s solicitors records that Mr Walker told her that Mr George had phoned the day before advising that other offers, one to buy the site (which he had rejected) and another to pay more rent had been received. According to the note, Mr Walker was still to confirm the 4% increase was acceptable. A further email that day requested the solicitor to advise Mr George that the 4% escalation clause, as per the previous lease, was accepted. The same day a file note of a conversation the solicitor had with Mr Walker records that she told him that there were more outstanding issues than he thought because he had never responded to the second draft. The tenor of the note is that consideration of those issues had been put in abeyance until the show cause issue had been settled.
Later on 29 October 2003 the respondent’s solicitor sent an email to it seeking instructions on a number of outstanding issues in the draft lease. Included was a draft response to an email of 10 October 2003, in which it was said that the rent review was agreed but issue was taken with the inclusion of the provision requiring personal guarantees. It was said that it was never “part of the agreement”. Mr Walker replied on 30 October 2003 saying he had not seen the solicitor’s email to the applicant’s solicitors of 23 September 2003 and therefore could not respond to the request for instructions. He said that he had told Mr George that he would take the escalation clause issue to his board. He said that in discussion with Mr George on 17 October 2003, Mr George had said that apart from the change to the rent he wanted the agreement to be the same as the previous one.
In a file note made on 31 October 2003 by Mr Walker, he records his response to Mr George’s advice that a competitor had offered $330,000 per annum, which was that the respondent was not prepared to change the figure agreed to and “would stick to the agreement that had been made”. Later that day, an email was sent to the applicant’s solicitors agreeing to the rent review provision, maintaining that the requirement for guarantors should be deleted and asking for a draft of the show cause clause for settling “following the agreement reached between our clients.” A file note of 4 November 2003 records Mr Walker recounting the conversation with Mr George where Mr Walker told him that the rent would not be changed and the respondent would be proceeding with the agreement reached.
Both parties provided written submissions, which were supplemented by oral submissions, analysing the transactions and the law in detail. Helpful as they are, I have come to the conclusion that the case bristles with simplicity rather than complexity. The respondent referred to a recent statement of principle by the High Court to be found in Ermogenous v Greek Orthodox Community of SA Inc (2001) 209 CLR 95 at 105 – 106:
“Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.”
In my view, looking at the events of 17 October 2003 objectively and with regard to what had been unresolved up to that time it is an unlikely construction of what happened to think that Mr George was indicating that he was abandoning all of the points that had been controversial up to that time in favour of an agreement in the previous form. The note from Mr Walker suggests that what was said by Mr George had an element of frustration in it. The main focus of the conversation was the escalation clause. The respondent’s argument that all the disputed matters were resolved by Mr George stating that he wanted the terms of the renewed lease to be the same as the old lease itself involves some selectivity since the original lease provided for escalation of 5%, not 4%. The inherent vagueness of the statement attributed to Mr George, and the unsatisfactory nature of it, given the focus of the discussion, as the basis of an assertion that there was an agreement to forego any existing contentious point is apparent.
Even if the concept of the show cause clause had been agreed and henceforth became no more than a drafting matter there is nothing to indicate that other matters that had been seriously in dispute did not remain that way. Of the three matters in the letter of 1 October 2003 upon which instructions had been sought and a negative response given by Mr George, it would have been the only one settled. Acceptance of the 4% per annum review of rent provision was still under consideration by the respondent. The issue of guarantors had not been resolved at all. Abandonment of such a requirement could only be established by accepting that the conversation of 17 October 2003 meant that since there was no requirement for guarantors in the former lease, it was no longer intended that there would be guarantors in the new lease. Further, the amended pages of the draft lease, which the evidence of the respondent’s solicitor suggests she had seen, included in the provision relating to guarantors the words “put in all directors from company search”. I do not accept that it had been accepted by the applicant that that requirement should be deleted, as the respondent asserted, because it was not in the original agreement.
It was accepted on behalf of the respondent that it was a critical step in the argument that the conversation of 17 October 2003 be construed as one in which Mr George had abandoned all of his requirements in favour of adopting the same kinds of provisions (subject to specifically agreed changes) as in the original lease. For the reasons given I do not accept that it was an objectively reasonable construction of what happened on 17 October 2003 to reach that conclusion, nor that it was the intention.
The fact that that conclusion has been reached means that one of the main supports of the respondent’s argument fails. However, it is desirable to go on to consider other subsequent events. Some focus was placed on an email of 21 October 2003 from the respondent’s solicitor to the solicitor dealing with the matter on behalf of the applicant. The subject of the email was the “show cause” clause. When he received it, he did not seek instructions from Mr George. Nor did he recall speaking to him about the transaction in the period before 30 October 2003. He said he believed that the document of 1 October 2003 returned to him on 2 October 2003 with three of the contentious issues not agreed to by Mr George represented his instructions until her heard otherwise. He did not respond to the respondent’s solicitor at all, notwithstanding the assertion in her letter. However unsatisfactory that may be, the result was that the issue of what had been agreed remained in a state where the request for confirmation of the assertion remained unresolved by the time the next important event occurred. The escalation clause and provision for guarantors were not touched on at all.
On 28 October 2003 Mr George instigated contact by telephone and told Mr Walker that he had a better offer of $330,000 per annum. Mr George’s recollection is encapsulated in the following passage of cross-examination:
“What I suggest to you is that you told Mr Walker you had the better offer and how much, 330 per annum, and Mr Walker then told you that he would have to get back to you about the figure?-- I remember that – the phone call because I made the phone call and he said that there’s no way in the world he could afford to pay that. He said his figures, as he said before, wouldn’t sustain it. We wouldn’t agree on the 4 percent, I don’t think. That was brought up, I think, in the conversation and I said to him, ‘Well, if you can’t do any better on your offer I’ll continue negotiations with the new offer.’
You say Mr Walker gave you an answer about all his facts and figures on the spot. I’m suggesting to you he said, ‘I’ll get back to you about that’ and did so a few days later?-- Well, I’m saying that’s what he said because I remember that phone call because it was very important to me that that was the discussion we had and he couldn’t move on that offer of 260.”
With respect to a subsequent conversation on 31 October 2003 Mr George gave the following evidence in cross-examination:
“… that’s when he said that he would look through his figures and 330 was not what he could agree to, but that he would stick to the figure that had been agreed?-- Well, I would have went back and said to him – if that was the phone call I would have – would have went back and said, ‘Well, I’m still negotiating with the other party.’ If he can’t come up to the figure, well, I’ll keep negotiating with the other party. I wasn’t going to back off.
Not going to back off what?-- What I told him on the 28th.
That you had a better offer?-- No, that I was going to negotiate it with the other party.
I suggest you didn’t tell Mr Walker anything of the sort?-- Well, that’s your suggestion, sorry.”
Mr Walker’s evidence with regard to these conversations was that when he received Mr George’s call about the better offer, he was surprised and said that he would get back to him. He agreed that he had not asserted that there was already a concluded agreement. He denied interpreting the conversation as giving him the opportunity to match the higher offer. He denied his purpose in going back over the figures was to see if he could do so. He said that he had done so because negotiations with Mr George had been friendly and he thought that he should re-examine the figures to see if he could increase his offer. He said that he would have contemplated doing so if the performance of the car park since the original price was arrived at was stronger than he thought. He accepted that any increase would not have matched the other offer. He said that the conversation consisted of Mr George telling him that he had had an offer to buy the land and an offer to increase the annual rent, with Mr Walker telling him that he would get back to him.
Coupled with the issues concerning the events of 17 October 2003, or standing alone, in my view it would require a greater degree of naivety than usual on the part of a person in Mr Walker’s position, or than I detected in Mr Walker, not to conclude that what Mr George had said was effectively indicating that, whatever had gone before, he was soliciting an offer of higher rental, even if he did not expressly say that he would keep negotiating with the other party. It may be accepted that Mr Walker may not have wished to antagonise Mr George at that point but equally he did not assert to him that there was a settled agreement subject to final resolution of the escalation clause.
Further, an email sent by the respondent’s solicitors on 31 October 2003, presumably reflecting instructions, agreed to the escalation provision but still referred to the need to delete the guarantor provision. There had never been any express agreement to delete requirement of the guarantor provision. A claim that it should be removed reflected either an attempt to conclude negotiations, or an argument founded on the proposition, which I have not accepted, that the conversation of 17 October 2003 represented the settling of all contentious issues between the parties but the escalation clause, by agreeing to revert to the form of the original lease.
For the reasons given, I am satisfied that the respondent’s case that there was an agreement for renewal of the lease on amended terms as agreed between the parties cannot be sustained. It follows that the grounds set out in the caveat as the basis for it cannot be sustained either. Accordingly the following orders are made:
1.The respondent deliver up possession of the property being the whole of the land situated at 43 Herschel Street, Brisbane and described as Lot 5 on RP 813314, County of Stanley, Parish of North Brisbane, title reference 50079512.
2.The caveat lodged in respect of the land by the respondent, namely a caveat with the dealing number 707499633 be removed forthwith.
3.The respondent pay the applicant’s costs of and incidental to the application to be assessed.
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