Young v Lamb

[2001] NSWCA 225

Reported Decision: (2001) 10 BPR 18,553
[2001] ANZ ConvR 629
[2001] ACL Rep 245 NSW 25
(2002) NSW ConvR 55-997

New South Wales

Court of Appeal

CITATION:	Young v Lamb & Ors [2001] NSWCA 225
FILE NUMBER(S):	CA 40661/00
HEARING DATE(S):	18 June 2001
JUDGMENT DATE:	13 July 2001
PARTIES :	Robert Francis Patrick Young v Kenneth John Lamb & Ors
JUDGMENT OF:	Mason P at 1; Stein JA at 2; Hodgson JA at 63

LOWER COURT JURISDICTION :	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	ED 5096/98
LOWER COURT JUDICIAL OFFICER :	Austin J

COUNSEL:	Appellant - M J Heath Respondents - R Colquhoun
SOLICITORS:	Appellant - Button Hawdon & McMahon Respondents - Daryl A Hurst
CATCHWORDS:	PROPERTY LAW - renewal of lease - whether option to renew exercised - whether an expression of an intention is binding - PROPERTY LAW - renewal of lease - service of notice of renewal - whether service on agent sufficient - COMPANY LAW - Partnership Act 1892 - whether had ostensible or implied authority - whether renewal of lease is business in the 'usual way' - D
LEGISLATION CITED:	Conveyancing Act 1919 - s 170 Partnership Act 1892 - ss 5 and 6 Partnership Act 1890 (UK) - s 5
CASES CITED:	Ballas v Theophilos (No 2) (1957) 98 CLR 193 Bava Holdings Pty Ltd v Pando Holdings Pty Ltd (1998) NSW Conv R 55862 Beyfus v Greene (1856-57) VLT 348 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 Carter v Hyde (1923) 33 CLR 115 Chan v Zacharia (1984) 154 CLR 178 Codelfa Construction Pty Ltd v SRA (1982) 149 CLR 337 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 James v Daniel [1894] 2 Ch 332 Mann v D'Arcy [1968] 2 All ER 172 Mandelberg v Adams (1930) 31 SR (NSW) 50 Mercantile Credit Co Ltd v Ganod & Anor [1962] 3 All ER 1103 Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 Quadling v Robinson (1976) 137 CLR 192 Townsend Carriers Ltd v Pfizer Ltd (1977) 33 Prop & Comp R 361 Union Bank of Australia v Fisher (1893) 14 LR (NSW) Eq 241 Zacharia v Ajay Investments Pty Ltd (No 1) (1983) 33 SASR 395
DECISION:	1. Appeal upheld with costs. 2. Respondents to receive a certificate under the Suitor's Fund Act 1951 for the costs of the appeal if otherwise entitled. 3. Set aside the orders made by the Court below. 4. In lieu thereof, declare that the respondents by letter dated 22 July 1998 validly exercised an option to renew the subject lease of Unit 15, Capital Coast Centre, Queen Street, Moruya and that the respondents have repudiated the agreement to renew the lease constituted by the exercise of the option. 5. The respondents pay the appellant's costs of the proceedings below. 6. Remit to the Equity Division to assess the damages to be awarded to the appellant.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40661/00
ED 5096/98


MASON P
STEIN JA

HODGSON JA

Friday, 13 July 2001

Robert Francis Patrick YOUNG v Kenneth John LAMB & ORS

Facts:

The respondents were a partnership operating a business trading under the name Moruya Furniture and Bedding. They leased business premises from the appellant. The lease contained an option to renew for a further three years. The respondents forwarded a letter stating that they intended to exercise the option, however later indicated that they would not be proceeding with the option as they had secured alternative premises.

One of the questions before the court was whether the letter forwarded to the appellant’s agent constituted a valid exercise of the option to renew the lease. The court was also concerned with whether the fourth respondent had ostensible or implied authority to deal on behalf of her partners, or whether s 5 of the Partnership Act 1892 conferred such authority upon her.

Held per Mason P, Stein and Hodgson JJA:

1) The letter to the appellant’s agent constituted a valid exercise of the option to renew the lease.

- Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 applied


2) The letter of 22 July, 1998 was appropriately served on the lessor by service on the lessor’s agent.
- Townsend Carriers Ltd v Pfizer Ltd (1977) 33 Prop & Comp R 361 applied

3) The exercise of the option to renew the lease was directed to the purposes of the partnership and done in order to carry on the business of the firm in the usual way.

- Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 considered

- Beyfus v Greene (1856-57) VLT 348 considered
- Mandelberg v Adams (1930) 31 SLR (NSW) 50 applied
- Mercantile Credit Co Ltd v Garrod and Anor [1962] 3 All ER 1103 applied
- Mann v D’Arcy [1968] 2 All ER 172 applied

4) The fourth respondent had implied or ostensible authority to exercise the option.

Orders:

1) Appeal upheld with costs.

2) Respondents to receive a certificate under the Suitor’s Fund Act 1951 for the costs of the appeal if otherwise entitled.

3) Set aside the orders made by the Court below.

4) In lieu thereof, declare that the respondents by letter dated 22 July 1998 validly exercised an option to renew the subject lease of Unit 15, Capital Coast Centre, Queen Street, Moruya and that the respondents have repudiated the agreement to renew the lease constituted by the exercise of the option.

5) The respondents pay the appellant’s costs of the proceedings below.

6) Remit to the Equity Division to assess the damages to be awarded to the appellant.

oOo


IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40661/00
ED 5096/98


MASON P
STEIN JA

HODGSON JA

Friday, 13 July 2001

Robert Francis Patrick YOUNG v Kenneth John LAMB & ORS
JUDGMENT

1    MASON P: I agree with Stein JA.

2    STEIN JA: The appellant, Robert Francis Patrick Young, appeals from a judgment entered by Austin J in favour of the respondents Kenneth John Lamb, Louise Ann Lamb, William Thomas Newell and Dianne Margaret Newell. The four respondents conducted a partnership trading under the name Moruya Furniture and Bedding. They leased Unit 15, Capital Coast Centre, Queen Street, Moruya from the appellant.

3    The subject lease was for a term of three years commencing on 1 November 1995. It contained an option to renew the lease for a further period of three years. The question for the trial judge was whether the respondents had exercised the option or not. The appellant contended that they had done so and the respondents contended to the contrary. His Honour found that the respondents had not exercised the option to renew.

4    The option clause is in the following form:

43 (a) The Lessor hereby offers a renewal of this Lease to the Lessee on the terms specified in this clause which the Lessee may accept strictly in accordance with the provisions contained in this clause, otherwise this offer shall lapse.
(b) This offer and the option shall bind the Lessor and the Lessor’s successors and assigns being the owners for the time being of the Land.
(c) This offer may be accepted by the Lessee or by the Lessee’s successors and assigns being the Lessee for the time being of the Demised Premises but if there are two or more people holding as Lessees then this offer shall not be capable of being accepted by less than all of the Lessees for the time being.
(d) The Lessee may only accept this offer and exercise the option if:
(i) the Lessee shall have punctually paid rent and observed the
covenants contained in this Lease throughout the lease term; and
(ii) the Lessee shall have served on the Lessor notice in writing of
exercise of acceptance of this offer and of exercise of this option during a period commencing six (6) calendar months and ending three (3) calendar months before the date of expiry of the term of this Lease.
(e) The renewal which the Lessee may accept under this clause shall be for renewal of this Lease for the further term referred to in Item 4 of Schedule Two from the day after the date of expiry of the term of this Lease and containing identical covenants to the covenants contained in this Lease subject to the following alterations:
(i) this clause shall be deleted and there shall be no further right to the Lessee to have the Lease renewed beyond the term referred to in Item 4 of Schedule Two;
(ii) the rental payable under any Lease renewed pursuant to this clause
shall be such rent as is agreed between the parties as being the current market rent for the Premises at the time of renewal provided that if the parties are unable to agree on the rent within fourteen (14) days of the date of the Lessee’s notice of acceptance under clause (d) (ii), then the rent shall be calculated by valuation in accordance with the provisions of clauses (b) (ii) - (g) of clause 5 hereof.

5    The respondents had leased the subject premises from the appellant prior to the 1995 lease, indeed it seems back to 1989. The 1995 lease was negotiated by the appellant, through an agent, with the third and fourth respondents. The fourth respondent, Dianne Newell, wrote to the appellant’s agent on 20 October 1995 agreeing to the proposed rent and asking for lease documents to be sent to their solicitor. In 1997 the appellant appointed a new managing agent for the premises, Barry Dedrick Real Estate Pty Ltd (Dedricks). On 4 July 1997 the new agent informed the respondents in writing that it had been so appointed. Thereafter, Mrs Newell (the fourth respondent) called at Dedricks to pay the rental on a monthly basis. She became known to the staff of Dedricks, particularly to Ms Janet Donnelly, who handled the appellant’s premises. Ms Donnelly dealt only with Mrs Newell, except on one occasion when she dealt with Mr Newell (the third respondent) about a break-in to the premises.

6    The lease terminated on 1 November 1998. This meant that, in accordance with cl 43(d) (ii), the option period commenced on 1 May 1998 and ended on 1 August 1998.

7    His Honour recorded the evidence that:

Prior to the beginning of the option period, the plaintiff instructed Dedricks to obtain a commitment from the lessees to exercise the option. He says it was extremely important to him that they would continue as lessees. Before the exercise period for the option to renew the lease, Dedricks contacted the defendants by letter dated 21 April 1998 reminding them of the option and inviting them to discuss it.

8    Austin J accepted that the following conversation took place, it seems at some time in April 1998, between Mr David Furzer, the principal shareholder in Dedricks, and Mrs Newell:

Furzer: ‘Hello my name is David Furzer I don’t think you know me Di [this is a reference to the fourth respondent]. Will you be taking up the option on your unit’.
Fourth defendant: ‘Yes, isn’t Bob happy with us’.
Furzer: ‘Not at all, will you put that in writing’.
Fourth defendant: ‘Yes I will’.

9    In May 1998 Mrs Newell was approached by a third party, Mr Downey who had premises available for lease. She commenced negotiations with this party and eventually the respondents took a lease of Mr Downey’s premises. These negotiations were not completed until mid September 1998.

10    The appellant, being aware that the option period would expire on 1 August 1998, was concerned to know if the respondents would wish to take a new lease of the premises. If they were not going to proceed, he wanted his agent to look for a new lessee. To this end he communicated with Dedricks on 22 July 1998.

11    However, on the very same day, the following facsimile handwritten letter was sent by Mrs Newell to Dedricks:

22 July 98,

Dedrick Moruya Real Estate
Vulcan Street
Moruya

Dear Sir,

Re Commercial Lease
Unit 15 Capital Coast Centre

We intend to exercise the option to renew our lease on the above premises. With the current economic condition of Moruya we would expect little or no increase.

Yours faithfully

[signed] Dianne Newell

D Newell
Moruya Furniture & Bedding
80 Queen Street,
Moruya 2537

12    The first three respondents gave evidence denying that each of them had expressly authorised Mrs Newell to send the above letter or to exercise the option on their behalf. None of them was aware of the letter until much later than 22 July 1998. His Honour accepted their evidence.

13    On 28 August 1998 the appellant’s solicitors sent a draft lease to the respondents’ solicitors for a new term of 3 years from 1 November 1998. On 21 September 1998 the respondents’ solicitor indicated that his clients would not be proceeding. In later correspondence, the solicitors denied that the 22 July 1998 letter constituted a binding exercise of the option. It was claimed that the letter was ‘couched in equivocal terms, but more importantly, it was not signed by all the Lessees’. This was treated by the appellant as a repudiation of the option agreement by the respondents. The respondents vacated the premises on 30 November 1998. Despite attempts to relet the premises, they remained vacant up until the hearing.

14    Austin J recorded that there were six questions raised about the efficacy of the letter of 22 July 1998. These were:

(a) was the letter, upon its proper construction, an acceptance of the lessor’s offer to renew the lease contained in clause 43?
(b) did the letter give rise to a contract to renew the lease, notwithstanding the lack of any agreement as to rental?
(c) was the letter served ‘on the Lessor’ as required by clause 43(d)(ii)?
(d) did the letter comply with clause 43 although it was signed only by one of the four lessees?
(e) did the fourth defendant have the authority (express, implied or ostensible) of the other three defendants to sign the letter?
(f) did the fourth defendant exercise authority as a partner of the other three defendants, in signing the letter?

Exercise of the option

15    In considering question (a) above Austin J said that the letter:

… expressed an intention to exercise the option and an expectation that there would be little or no increase in rent. The letter was handwritten and was not cast in formal terms, and did not refer to or use the language of the option clause. On the face of it, it appears to be an expression of an intention to take a binding step in future, not itself binding, and capable of being resiled from. (Emphasis in original)

16    After referring to the case law his Honour said:

In the present case there was no reference to any clause of the lease, nor any indication in the letter that the particular provisions of the option clause had been considered. More importantly, nothing in the letter suggested that it was intended to be an ‘official notice’ with immediate operative effect. It was, in its terms, nothing more than a statement of intention to take an operative step in future.

17    Austin J concluded that the letter did not amount to an unqualified election to take up the rights and obligations of the lessee under a renewed term. The surrounding circumstances, so his Honour indicated, supported this conclusion. Since Mrs Newell was ‘under pressure’ from Dedricks to provide a written response, what she did was a rational response to the dilemma of not having finalised negotiations for a lease from Mr Downey. His Honour said that Mrs Newell endeavoured to ‘hold’ her position with the appellant by giving Dedricks ‘a written but non-binding statement of intention to renew’ while proceeding to establish whether alternative premises would be available.

18    His Honour referred to what he regarded as ‘puzzling’ evidence of Mrs Newell to the effect that she wanted to do something in relation to the exercise of the option, in order keep it open in case the negotiations with Mr Downey ‘fell-over’. Mrs Newell agreed that in that event, she wanted to be in a position to say that she had exercised the option. His Honour said that the respondents objected to this evidence but that he had allowed it, albeit with some hesitation. The transcript contains no record of any objection. His Honour said that, on reflection, the evidence was inadmissible by reason of the parol evidence rule explained by Mason J in Codelfa Construction Pty Ltd v SRA (1982) 149 CLR 337 at 347 and 352.

19    But even if Mrs Newell’s evidence had been admissible, his Honour’s conclusion would have been the same. This was because, as his Honour explained, Mrs Newell:

… did not appreciate the distinction between an intention to exercise the option in future, and an intention to take an operative and binding step immediately. The answer to the cross-examiner’s question should therefore not be construed as an assertion that she intended the letter to have an immediately operative though conditional effect. She was merely saying that she wanted to preserve the availability of the plaintiff’s premises in the event that her alternative negotiations broke down, and in that event to rely on the letter as evidence of the defendants’ intention to move towards a new lease.

20    Regrettably, I am unable to agree with his Honour’s conclusion on the construction of the letter of 22 July 1998. On its face the letter was:

· addressed in a formal manner

· signed in the firm’s name

· canvassed but one issue, the ‘option to renew’

· a response to the agent’s inquiry

· addressed to the managing agent

· referred to the ‘commercial lease’ and defined the subject premises

· used the words ‘we’ and ‘our’ and not ‘I’

· signed by Mrs Newell over the trading name of the firm, and

· clearly purported to be signed by Mrs Newell on behalf of the firm

21    In Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677 Kirby P usefully summarised the applicable principles.

22    First, the purported exercise must clearly and unequivocally express the fact that it is intended to exercise the option, Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196.

23    Next, it is unnecessary that the words used conform precisely to the terms of the option, Ballas at 205.

24    Thirdly, the appropriate question to ask is what anybody who received the letter would fairly have understood to be the meaning of it, in all the circumstances of its receipt, Carter v Hyde (1923) 33 CLR 115 at 126 adapting Jones v Daniel [1894] 2 Ch 332.

25    Fourthly, a notice which mis-states the terms of the option may nevertheless amount to an unqualified and unconditional exercise, Quadling v Robinson (1976) 137 CLR 192 at 201.

26    Lastly, every case ultimately depends on its own facts and upon the proper construction of the document in dispute.

27    The separate judgments of Samuels JA and McHugh JA are to similar effect.

28    Bearing in mind these principles and the aspects of the letter which I have enumerated earlier, it is plain that the use of the words ‘we intend to exercise the option to renew our lease’ were sufficiently clear to amount to an operative act as opposed to a mere statement of future intention. See for example Bava Holdings Pty Ltd v Pando Holdings Pty Ltd (1998) NSW Conv R 55862 at 55760-62, Prudential Assurance at 679 and Ballas v Theophilos [1958] VR 576 at 581.

29    The circumstances of receipt are also important. It was Mr Furzer’s inquiry of Mrs Newell which preceded her forwarding the letter of 22 July 1998. In this regard, indeed from an examination of the whole of the evidence, there was no ‘pressure’ or ‘duress’ exerted by Mr Furzer upon Mrs Newell. Moreover, there was no evidence that Mrs Newell failed to appreciate the distinction between ‘an intention to exercise the option in the future’ and ‘to take an operative and binding step immediately’. Indeed, she was never asked.

30    The plain words used in the letter lead inevitably to the conclusion that the letter, as a matter of construction, constituted a clear and unequivocal act to exercise the option. The recipient would have so understood it.

31    His Honour’s answer to question (b) was correct, given the decision in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, and I do not understand that the respondents seriously submit to the contrary.

Service of the option letter

32    Clause 43(d) (ii) refers to service ‘on the Lessor’. ‘Lessor’ is defined in cl 1(b) of the lease as:

‘Lessor’ shall mean and include the lessor or lessors if more than one referred to in this Lease and each of them and their legal personal representatives and successor in title.

33    The letter of 22 July 1998 was served on the appellant’s agent, Dedricks. It will be observed that the above definition does not include an agent of the lessor.

34    His Honour relied on cl 43(a), which requires that the lessee may accept the offer by the lessor of a renewed term ‘strictly in accordance with the provisions in this clause’.

35 Austin J concluded that the letter was not served on the lessor as required by cl 49 or s 170 of the Conveyancing Act 1919. He found that this was a failure to comply with the exercise procedure ‘in an essential way … even though the letter eventually came to the notice of the plaintiff’. His Honour’s reference to ‘eventually’ does not accord with the evidence which appears to indicate, as was accepted by the respondents, that the letter was received by the appellant later on the same day (22 July 1998).

36    What is plain about the definition of ‘lessor’ is that it does not preclude acceptance by the appellant’s agent. It is silent on the matter. Given that the lease contains no address for the lessor, how is the lessee to effect service ‘on the lessor’? It seems to me to make perfect sense to serve the letter on the lessor’s duly appointed agent, Dedricks. The respondents had been notified that Dedricks had been appointed as managing agent. Dedricks wrote to the respondents on 21 April 1998 reminding them of the option. There was no evidence to suggest that the agent’s authority was in any way limited. Indeed, that Dedricks had authority to accept any letter exercising the option is reflected by the course of dealings between the parties.

37    The relevant principle is expressed by Bowstead & Reynolds on Agency (16th Edition) as follows:

(1) A notification given to an agent is effective as such if the agent receives it within the scope of his actual or apparent authority, …
(2) The law imputes to the principal and charges him with all notice and knowledge relating to the subject matter of the agency which his agent acquires or obtains while acting as such agent. [8 - 204]

38    In Townsend Carriers Ltd v Pfizer Ltd (1977) 33 Prop & Comp R 361 at 365, Megarry VC said:

The same principle has been applied to the exercise of a contractual power of determination in a lease: see Re Knight and Hubbard’s Underlease [1923] 1 Ch 130. These cases are, of course, decisions on the giving of notice rather than on receiving it, but I can see no reason why an agent who has power to give an effective notice should be denied the power effectually to receive a notice. I do not think that the principle that it is more blessed to give than to receive is part of the law of landlord and tenant.

39    In my opinion, the letter of 22 July 1998 was appropriately served on the lessor by service on the lessor’s agent Dedricks.

Implied authority and the Partnership Act

40 The next questions are whether Mrs Newell had implied or ostensible authority to deal on behalf of her partners or whether s 5 of the Partnership Act 1892 conferred authority on her to exercise the option. Although these may be seen as separate issues, I think that they amount to the same thing. The second limb in s 5 appears to state the common law so far as ostensible authority is concerned, see Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 at 547 - 548:

The second limb of s. 5 deals with ostensible authority. Even though actual authority be lacking, the act of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member binds the firm and his partners unless the other party “either knows that he has no authority, or does not know or believe him to be a partner”. Again, this limb effectively states the common law.

41 Section 5 provides:

Every partner is an agent of the firm and of the other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which the partner is a member , binds the firm and the other partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom the partner is dealing neither knows that the partner has no authority, or does not know or believe the partner to be a partner. (Emphasis added)

42    Lindley & Banks on Partnership (17th Edition) summarise the operation of the section as follows:

(1) An act done by a partner on behalf of the firm within the scope of his actual authority will bind the firm whether or not the act was done in carrying on the partnership business in the usual way
(2) An act done by a partner on behalf of the firm in the course of carrying on the partnership business in the usual way will prima facie bind the firm, even if the partner acted without authority. [12 - 08]

43    The learned authors say that whether an act will fall to be treated as done in the usual course of carrying on a particular business will depend on the nature of the business and on the practices normally adopted by persons engaged in carrying on businesses of that type.

44    In considering the question of the authority of one partner to enter into a lease for partnership purposes, the present authors state that there is no general principle but account must be taken of the nature of the business and the duration of the partnership, (12 - 73).

45    Halsbury’s Laws of Australia (Partnership and Joint Ventures) at 305 - 390, states that where a lease forms part of the partnership property, the renewal of that lease by any of the partners is for the benefit of the partnership, Zacharia v Ajay Investments Pty Ltd (No 1) (1983) 33 SASR 395, affirmed in Chan v Zacharia (1984) 154 CLR 178.

46    Halsbury further states that it is a question of fact whether or not a given transaction is usual in the context of the business of a particular nature. It is not sufficient that a given act is a convenient means of carrying on a business, the act must be reasonably necessary, citing Union Bank of Australia v Fisher (1893) 14 LR (NSW) Eq 241. This point is also taken up by Higgins & Fletcher, The Laws of Partnership in Australia and New Zealand, 7th Edition at 157.

47    There are a number of authorities which have considered the meaning of the words ‘in the usual way’.

48    In Beyfus v Greene (1856-57) VLT 348 at 349 A’Beckett CJ said:

The only other authority we shall particularly refer to, is that of Douglas v Bruen , a decision by the House of Lords, where it was held that a trust deed for the benefit of Scotch creditors, made by one of three partners in two Scotch firms, is not such an act in the ordinary course of the partnership business as to be valid against the other two partners or their representatives. In giving judgment the Lord Chancellor said - “It is perfectly true that one partner can bind the other in all ordinary transactions, but that is not the case here. The creation of trusts by the trust deed is not one of the ordinary transactions of a partnership”. These and other cases, whilst upholding the general principle that one partner has authority to bind the rest in regard to partnership transactions, in the ordinary modes of creating such obligations, show that when these modes are departed from, an authority must be proved in respect of the whole before the act of one will bind the remainder.

49    In Mandelberg v Adams (1930) 31 SR (NSW) 50 at 52 Ferguson J said:

The implied authority is not confined to trading partnerships, but if it is sought to show that in any particular partnership each partner had power to bind the firm by borrowing money, their evidence must be given to show that the borrowing of money was necessary for carrying on in the usual way business of the kind carried on by that firm.

50    After quoting from Lindley on Partnership, Mocatta J said in Mercantile Credit Co Ltd v Garrod and Anor [1962] 3 All ER 1103 at 1107:

That is, I think the sum total of the express evidence on the matter. I do not think that it in any way militates against my using what I regard as my common sense in the matter. To some limited extent I think that it supports my view of the matter, and I consider, therefore, that when Mr. Parkin entered into this sale to the plaintiffs of a Mercedes Benz as part and parcel of his hire-purchase arrangement, under which the plaintiffs purchased from the partnership and were to hire out the car on hire-purchase terms to Mr. Cox, Mr. Parkin was doing an act of a like kind to the business carried on by persons trading as a garage, and on that ground, if on no other, my decision in this case must be in favour of the plaintiffs.

51    Mann v D’Arcy [1968] 2 All ER 172 squarely raised the meaning of the words ‘in the usual way’ in s 5 of the UK Partnership Act 1890.

52    Megarry J (as he then was) said at 176:

The question s 5 that has troubled me a little is the phrase “in the usual way”. In relation to any joint ventures, counsel for the plaintiff has expressly disclaimed any usage of produce merchants in general; and on the facts of this case he cannot rely on any course of conduct in this particular partnership. He does, however, place some weight on a passage discussing this section set out on p. 168 of LINDLEY’S LAW OF PARTNERSHIP, though he couched his arguments in terms of what was “reasonably necessary” for carrying on the business, rather than on carrying on the business “in the usual way”. His link between these two expressions was that to do what was absolutely necessary for the conduct of the business, or what was reasonably necessary, or even what was highly desirable for it, was to carry on the business “in the usual way”.
…
It is important not to be bewitched by words. There are partnerships and partnerships. A general partnership for a period of years may be very different in substance from a partnership in a single venture; and one single venture may differ greatly from another. In Tourne v. Eisner (1918) 245 US Rep R 418 at 425 Holmes J., reminded us that “a word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used.” One must, I think, penetrate beyond the word “partnership” to the substance of the transaction and not generalise the words of either JAMES, L.J., or LINDLEY’S LAW OF PARTNERSHIP beyond anything that they can fairly have intended. Looking in that way at the transaction in this case, I reach the conclusion that it was within the scope of the first defendant’s authority to enter into the alleged partnership agreement and that he thereby bound not only himself but also the second and third defendants.

53    In my opinion, the exercise of the option to renew the lease of retail premises was reasonably necessary for the carrying on of the business of the respondents. It was an act directed to the purposes of the partnership and one which was done in order to carry on the business of the firm in the usual way.

54    In this regard, the evidence was that the partnership had been in existence since 1989 and had carried on its business at the appellant’s premises in Moruya for many years. Prior to the 1995 lease, the firm had previously leased the premises from the appellant.

55    Mrs Newell gave evidence that she and her husband (the third respondent) managed the business. She accepted that the 1995 lease and the new lease (if it had been taken up) were for the purposes of the business.

56 The sending of the letter of 22 July 1998 was an act relating to the business of the firm, done in the firm’s name, revealing an intention to bind the firm within s 6 of the Partnership Act.

57    It follows, in my view, that the sending of the letter of 22 July 1998 to Dedricks exercising the option binds the partnership. This is notwithstanding the evidence of the first to third respondents that they gave no express authority to the fourth respondent to exercise the option on their behalf.

58    By the same token, it seems to me that the evidence also establishes that Mrs Newell had implied or ostensible authority to exercise the option. She was the partner who had all the dealings with the appellant’s agents over the lease. Indeed, she had negotiated the rental terms of the 1995 lease. She was the person, and the only lessee, with whom contact was made about the lease and the exercise of the option. The letter itself speaks in terms of ‘we’ and ‘our lease’ and is signed in the firm’s name. The appellant or his agent were never told of any lack of authority in Mrs Newell.

59    Accordingly, it is my view that his Honour should have found in favour of the appellant on the issue of the exercise of the option. It is therefore unnecessary to consider the alternative claim for damages for breach of warranty of authority.

Damages

60    His Honour determined that damages would need to be assessed if the appellant had succeeded (para 16 Judgment). Because of the view he had taken, his Honour did not proceed to do this. Counsel for the appellant submits that this court should assess damages as, in his submission, all of the necessary evidence had been adduced at the trial.

61    However, I do not think that it would be appropriate for this court to assess the damages given the contested evidence on mitigation of loss. The matter should be remitted to the Equity Division to assess damages.

Proposed Orders

62    1. Appeal upheld with costs.

2. Respondents to receive a certificate under the Suitor’s Fund Act 1951 for the costs of the appeal if otherwise entitled.

3. Set aside the orders made by the Court below.

4. In lieu thereof, declare that the respondents by letter dated 22 July 1998 validly exercised an option to renew the subject lease of Unit 15, Capital Coast Centre, Queen Street, Moruya and that the respondents have repudiated the agreement to renew the lease constituted by the exercise of the option.

5. The respondents pay the appellant’s costs of the proceedings below.

6. Remit to the Equity Division to assess the damages to be awarded to the appellant.

63    HODGSON JA: I agree with the orders proposed by Stein JA and with his reasons.

64    In relation to the intention manifested by the letter of 22 July 1998, I would add that the circumstance that it was sent a matter of days before expiry of the time for exercise of the option confirms that it disclosed an intention to exercise the option and not merely to foreshadow a future exercise.

65    In relation to service, I would note that a copy of the letter was received by the lessor himself on 22nd July 1998, and in my opinion this is a further reason why service on the lessor was established.

66    In my opinion, the most doubtful question is whether Mrs. Newell had implied or ostensible authority to exercise the option as agent for the partners. I agree with Stein JA that whether one partner has such authority to bind partners to a lease of premises for partnership purposes must depend on all the circumstances, and that the circumstances of this case are such that Mrs. Newell did have that authority.

oOo