Lend Lease Financial Planning Limited v Southcap Pty. Ltd.
[1998] QCA 117
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- Lend Lease Financial Planning Limited v Southcap Pty. Ltd.[1998] QCA 117
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Lend Lease Financial Planning Limited v Southcap Pty. Ltd.[1998] QCA 117
Lend Lease Financial Planning Limited v Southcap Pty. Ltd.[1998] QCA 117
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 8999 of 1997
Brisbane
[Lend Lease Financial Planning Ltd. v. Southcap P/L]
BETWEEN:
LEND LEASE FINANCIAL PLANNING LIMITED
ACN 056 426 932
(Defendant) Appellant
AND:
SOUTHCAP PTY. LTD.
ACN 002 626 182
(Plaintiff) Respondent
McPherson J.A.
Pincus J.A.
Derrington J.
Judgment delivered 2 June 1998
Separate reasons for judgment of each member of the Court; each concurring as to the order made.
APPEAL DISMISSED WITH COSTS.
CATCHWORDS: CIVIL - CONTRACT LAW - Whether there was a finally concluded and binding contract capable of being specifically performed - Whether parties intended to not to be bound until a formal instrument was executed - Whether parties mistaken in assuming they were immediately bound as critical matters of detail were unresolved - Whether uncertainty in the term “outgoings”.
Masters v. Cameron (1954) 91 C.L.R. 353;
Zimin v. Wentworth Properties Pty. Ltd. [1959] S.R. (N.S.W.) 101;
Tooth & Co. Ltd. v. Bryen (No. 2) (1922) 22 S.R. (N.S.W.) 541;
Tubbs v. Wynne [1897] 1 Q.B. 74;
Fisher v. Oborn [1968] 3 N.S.W.R. 447;
Tooth & Co. Ltd. v. Newcastle Developments Ltd. (1966) 116 C.L.R. 167.
Counsel: Mr E.J. Lennon Q.C. for the appellant
Mr T.D. North for the respondent
Solicitors: Freehill Hollingale & Page for the appellant
Minter Ellison for the respondent
Hearing Date: 27 April 1998
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 8999 of 1997
Brisbane
Before McPherson J.A.
Pincus J.A.
Derrington J.
[Lend Lease Financial Planning Ltd. v. Southcap P/L]
BETWEEN:
LEND LEASE FINANCIAL PLANNING LIMITED
ACN 056 426 932
(Defendant) Appellant
AND:
SOUTHCAP PTY. LTD.
ACN 002 626 182
(Plaintiff) Respondent
REASONS FOR JUDGMENT - McPHERSON J.A.
Judgment delivered 2 June 1998
In this appeal from the Supreme Court, there are no disputes about particular facts. The learned trial judge, who was Thomas J., held that, in the circumstances as he found them to be, the parties had arrived at a legal binding agreement for lease, and he ordered specific performance of it. The appeal, which is by the defendant Lend Lease Financial Planning Limited, challenges that conclusion, and submits in substance that there were outstanding matters which had not been the subject of precise agreement and so prevented it from being a finally concluded and binding contract capable of being specifically performed.
It is as well to start with the terms of the agreement that was ordered to be performed, which was for a lease by the plaintiff to the defendant of a floor of a building in Brisbane known as Logan House. The agreement is comprised in two letters, one of which dated 23 June 1995 was from Mr Boreham of the plaintiff’s agent Boreham & Company (Qld.) Pty. Ltd., and the other dated 11 July 1995 was from Mr Dixon, who was the general manager in Queensland, of the defendant. There had been earlier correspondence in which the proposed lease had been discussed, and the two letters in question were the result of those negotiations.
The letter of 23 June from Mr Boreham is headed Proposed Lease Second Floor Logan House. Its text is as follows:-
“Further to our discussions we write to confirm our agreement for a Lease as follows:
Area: As indicated on the attached plan, we estimate this to be 378 square metres subject to survey.
Lease Term: Four years.
Commencement: 1 September 1995.
Rent: To be calculated at a rate of $170.00 per square metre net.
Outgoings: Tenant to pay a proportion based on the area of the tenancy to include air conditioning electricity costs.
Electricity and
Cleaning: Payable by tenant.
Rent Review: Each two years to market.
Car Parking: 8 undercover car bays at a commencing rental of $75.00 per month per car bay.
Special Conditions: The Lessor will replace the carpet throughout the tenancy and the foyer. All internal walls will be repainted and the ceiling made good where necessary. In addition the Lessor agrees to undertake the alterations in the tenancy as indicated on the attached plan.
The Lessor reserves the right to install an emergency escape door to the intertenancy wall should this be required by the building authorities in favour of the adjacent tenancy.
Would you please confirm your agreement to these proposed terms and conditions. We will then instruct the Lessor’s solicitors to forward Lease documents for your execution.”
Attached to the letter were plans showing necessary partitions and the area to be leased.
The reply to Mr Boreham’s letter was contained in the letter dated 11 July 1995 from Mr Dixon. It is headed in the same way as the letter from Mr Boreham, and proceeds as follows:
“Further to your letter of the 23 June with various plans attached, I hereby confirm our agreement to the proposed terms and conditions as laid out in that correspondence.
Would you please instruct the Lessors [sic] solicitors to prepare the appropriate documents and forward them for execution to:
Mr Don Wiggins
Lend Lease Broker Services
1094 Doncaster Road
Doncaster East Vic 3109
Please show the Lessee as being Lend Lease Advisor Services Ltd in the documentation.
Please give me a call if there is anything further you wish to discuss.”
What immediately strikes the reader about Mr Dixon’s reply is that, apart from identifying the defendant as the lessee and referring to the preparation and transmission for execution of “appropriate” documents, the letter of 11 July 1995 consists of no more than a straightforward confirmation of the defendant’s agreement to the “proposed terms and conditions”. Such terms and conditions are identified as being those “laid out in that correspondence”, which in the context plainly refers to Boreham’s letter under reply. On the face of it, therefore, the terms and conditions of the proposed lease were agreed upon, and it remained only for an instrument of lease to be prepared and executed giving effect to them.
In these circumstances, it seems to me that only two possible matters are capable of being raised to prevent enforcement of the agreement for lease. In Geebung Investments Pty. Ltd. v. Varga Group Investments No. 8 Pty. Ltd. (1995) 7 B.P.R. 14,551, at 14,552, Gleeson C.J. described them as follows:
“In a case such as the present, there are two, sometimes related, questions which require to be considered. The first is whether the parties to the putative contract intended to make a concluded agreement.
The second is whether they succeeded in doing so. The answer to the second question may depend upon a number of factors, including, whether the parties have reached agreement upon all the terms necessary, in the circumstances, to constitute a contract. In that connection, an implication of terms, or resort to considerations of reasonableness, may assist a conclusion that a contract has been made.”
For present purposes, the first question here is whether, although, the words used by the parties in their correspondence strongly suggest they had arrived at a final and concluded agreement, it nevertheless contemplated that they would not be bound until a formal instrument of lease was executed. The second is whether, even if their correspondence showed that they had a present intention of being immediately bound by their agreement, they might nevertheless have been mistaken in assuming they had been successful. Unknown to them, matters of detail more or less critical to the finality and enforceability of the agreement might still have needed to be resolved. Those matters might in the end have given rise to such differences between them as to demonstrate that, despite their common impression to the contrary, the truth was that they had in fact not yet arrived at an agreement that was in all respects concluded and final in its terms.
As regards the first question, the defendant relied on the well known statement of principle in Masters v. Cameron (1954) 91 C.L.R. 353, 360. The parties, it was said, plainly contemplated the preparation and execution of a formal instrument of lease. Both letters refer to it as something that is to take place in future. The execution of such an instrument was something in which both lessor and lessee had an obvious interest. Title to the land was registered under the Land Title Act 1994. By s. 71 of that Act the lease, if not registered, would not by reason only of that fact be invalid; but the agreement being for a term of four years, it was not a “short lease” as defined in that Act, with the consequence that, if not registered, the lessee’s interest under it would not gain the benefit of indefeasibility under s. 185(1)(b) of the Act. As an equitable lease, it would, under s. 185(1)(a), be good against the lessor who created it; but not necessarily, or at all, against other persons having prior or subsequent interests in the same land.
Registration and, for that purpose, execution of a lease was therefore something that, it may be assumed, the parties themselves would have regarded as essential. It does not follow that they considered execution of a lease in registrable form, or its registration, as a condition precedent to their being contractually bound. The inference that a binding contract was intended is not inevitably or even naturally displaced by the request in the letter of 11 July to forward documents for execution. The ordinary meaning of an expression like that is, it has been said, “please forward a form of document embodying the terms on which we have agreed”. See Lennon v. Scarlett & Co. (1921) 29 C.L.R. 499; and cf. Godecke v. Kirwan (1973) 129 C.L.R. 629, where execution of a further agreement, containing additional covenants and conditions as might be required by solicitors, was expressly stipulated for, but the original agreement was nevertheless held to have been intended to bind the parties.
With these considerations in mind, the transaction can be regarded as falling fairly within the first class of case described in Masters v. Cameron (1954) 91 C.L.R. 353, 360, as being one in which “the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect”. The matter is not one in which the parties used the fateful words “subject to contract”, or any other similar formula, which was said in Masters v. Cameron (1954) 91 C.L.R. 353, 363, “prima facie [to] create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract”. The need for registration of the executed instrument of lease was not a matter calculated to give rise to such an inference. Experience shows that parties who consider themselves legally bound often set about acting under and in terms of an agreement for lease, by entering into possession and paying and receiving rent well before registration of the instrument of lease, or even of its execution, which may not in fact be effected until some time after the commencing date of the term specified in the agreement for lease. No doubt there are risks in adopting that course; the exigencies of commerce cannot yield to delays in conveyancing. If it were otherwise, an equitable lease would seldom, if ever, be enforceable on the principle in Walsh v. Lonsdale (1882) 21 Ch.D. 9 in any but the simplest of cases.
I am aware that in Zimin v. Wentworth Properties Pty. Ltd. [1959] S.R. (N.S.W.) 101 a different conclusion was reached in a case where the relevant memorandum of agreement referred to a “lease to be prepared by the Company’s solicitors”. But that was an instance in which, in the ensuing discussions, three particular matters were identified by one of the parties for inclusion in the lease, following which the plaintiff’s solicitors concluded a letter on that subject with an invitation to “submit a form of lease to us for approval on behalf of the lessees”. Moreover, a close reading of the reasons of members of the Full Court in that case discloses that the original agreement provided that, if the lessee held over after the five year term had expired, the conditions applicable to that tenancy were “to be mutually agreed upon” ([1959] S.R. 101, 105). There were discussions between the parties’ solicitors leading to a proposal for resolving this area of uncertainty, but it was understood on both sides to be a matter for the plaintiff whether or not he would accept it, which in the event he elected not to do. The matter was therefore one in which, having left a particular question to be resolved by subsequent agreement which never eventuated, it was natural to view the execution of a formal lease as a prerequisite to the creation of any obligation finally binding on the parties. In so far as the reasons for judgment stress that prior execution of a formal lease was needed, the decision there may be contrasted with that in Tooth & Co. Ltd. v. Bryen (No. 2) (1922) 22 S.R. (N.S.W.) 541, where an acceptance “subject to the usual conditions contained in a draft lease which can be inspected” at the office of the lessor’s solicitor was held not to have the effect of making it an agreement that was conditional only. Although at the time of the agreement no draft had even been prepared, Street C.J. in Eq. regarded the words quoted as no more than “an expression of the desire of the parties as to the manner in which the transaction already agreed to should be carried through”, and as being one in which the usual covenants would be implied. The fact that execution of a formal lease was contemplated was not regarded as fatal to a claim for specific performance of the agreement for lease.
None of the difficulties considered in those two cases are present here. The parties left nothing to mutual agreement at a later date. All the essential elements of an enforceable lease were agreed upon. The term was to be four years, commencing on 1 September 1995, at a rent to be calculated at a rate of $170 per square metre net. Ground 1(c) of the notice of appeal makes the point that the parties had not defined “net rent”; but it was not raised below or pursued in the appeal before us. The subject matter of the proposed lease was the second floor of Logan House. The premises were well known to the parties. Part of the second floor had from 1989 previously been leased to another company Australian Eagle, which was planning to vacate on 31 August 1995. It was a company associated with the defendant; Mr Dixon was an officer of both companies; and both of them had occupied parts of the area leased. Under the earlier lease, the plaintiff had rights against Australian Eagle to have the premises restored or for payment in an equivalent amount of $22,918.00. Dixon negotiated a waiver by the plaintiff of that claim, which was agreed after the exchange of the two letters of June and July 1995. In terms of those letters, the total amount of the rent depended on the precise area to be leased, which was to be determined by survey. When carried out the survey showed it to be not 378 sq.m. but 366 sq.m., and the necessary adjustments were made. At the trial no point was made of this by either party. The letter of 23 June 1995 also contained certain Special conditions requiring work of various kinds to be done. By 20 October 1995, all of the work had been carried out. The new carpet referred to in that letter had been ordered and paid for, and was ready for installation when the defendant elected not to proceed with the agreement. A submission at the trial that the defendant’s contractual obligation was conditional on the work being completed before the commencement date of the lease on 1 September 1995 was repeated on the appeal. It is not possible to sustain it. Before the work was done the defendant entered into and remained in possession of the leased premises and paid the rent until it vacated in December 1995. If performance or completion of the work was a condition precedent to a binding lease, the defendant with full knowledge plainly dispensed with precise compliance with that requirement. Giving and taking possession and paying and receiving rent calculated in accordance with the terms of the lease are cogent and further indications that the parties intended to be bound then and there, and not at some future date when the instrument of lease was executed.
In these circumstances, it is difficult to identify any matter, essential or otherwise, on which the parties were not agreed, which is the second of the two questions referred to earlier in these reasons. At the trial and on appeal, attention was directed to the expression “outgoings” in the letter of 23 June, as to which the letter required the tenant to pay “a proportion based on the area of the tenancy”, to include air conditioning electricity costs. It was submitted that that provision was uncertain as regards both content and method of ascertaining the proportion specified. Payment of electricity and cleaning costs were expressly provided for in the letter. Other matters were covered by the description “outgoings”. It is an expression that has been in common use over the last 150 years in leases and in contracts for sale of land. In those contexts there are literally dozens of reported decisions in England, as well as some in Australia, in which its content has been considered in relation to particular charges. In covenants in leases, it is commonly tacked on to a provision imposing on the lessee an obligation to pay all rates and taxes in respect of the premises occupied. In Tubbs v. Wynne [1897] 1 Q.B. 74, 78, it was said to be “not very easy” to collect any definite principle from the decisions on such covenants, while adding that they at least established that “outgoings” is “the largest word which can be used”. In Fisher v. Oborn [1968] 3 N.S.W.R. 447, 450, Else Mitchell J., speaking in the context of sales of land, said that “outgoings” were not limited to moneys charged on land, nor to periodical payments of a recurring character. In sales of land (of which sales or assignments of leases are a variety), Voumard on The Sale of Land, 2nd ed., at 342, says that “outgoings” can be used to indicate expenses incurred or payable in respect of or as incidental to the ownership of property. In a contract of sale, the author continues:
“... the term normally refers, in the absence of an express provision to the contrary, to expenses payable in respect of the property actually comprised in the contract, and not in respect of a larger property of which, in the hands of the vendor, it may have formed part.”
The expression “outgoings” continues to be used in covenants in leases. The Australian Encyclopaedia of Forms and Precedents, 2nd ed., vol. 8, at 48-50, contains an extended note of decisions concerning its application to particular expenses, as well as offering several forms of precedent in which it appears. See, for example, Forms 235 and 236; and also the note in vol. 8, 3rd ed., at §[90], as well as the equivalent English Encyclopaedia, 4th ed., vol. 11, at 65-74. In the light of this extensive current and past usage by conveyancers, it is quite out of the question now to suppose that “outgoings” has no meaning at all, or one that is so indefinite or imprecise as to be devoid of content. In instances of this kind, the courts have no alternative but to arrive at a meaning for the expression based on common usage and, so far as they assist, reported decisions on the subject. What is clear is that, if a lease says no more than does the letter of 23 June, which is that the tenant is to pay “outgoings”, an agreement to that effect is not void for uncertainty or for failure to agree on an essential matter.
What was also submitted below was that an element of uncertainty resulted from the agreement here to pay a proportion of outgoings “based on the area of the tenancy”. However, the area of the tenancy is readily ascertainable and has in fact been ascertained as being 366 sq.m. The attempt on appeal to complicate the question by referring to the provision for eight undercover car bays is, in my respectful opinion, not sustainable. The agreed provision relating to them admittedly refers to a monthly “rental” of $75 per car bay. But it would be extraordinary if by that was meant that the eight car bays were to be considered part of the premises demised rather than as additional areas licensed for that particular use and at that rate. They are plainly not part of the area on the attached plan with reference to which the rental is to be calculated and paid at the rate of $170 per sq.m. It is true that in Brisbane rates are levied on the unimproved value of land, which in the context of this agreement means the whole area of the rateable parcel or parcels on which the relevant building stands. What the agreement requires is that a proportion be arrived at between the area demised and that whole area. As the learned trial judge pointed out in his reasons, the proportion may need adjustment where there is more than one building or tenanted area on the same land. That such adjustments are inherent in the process of arriving at the appropriate proportion of outgoings can be gathered from the reported cases, of which Tooth & Co. Ltd. v. Newcastle Developments Ltd. (1966) 116 C.L.R. 167, 170, 171, is an example. There their Honours said that the liability of the tenant for “all rates taxes duties ... and outgoings of every description”, that were to be paid under the covenant in that case, “extended to pay[ing] only such part as could be said fairly to be imposed or charged in respect of the demised premises”. The passage in the reasons for judgment which follows demonstrates the method to be adopted for arriving at a due or just proportion of the particular “outgoing” in question (which in that instance was land tax) attributable to the demised premises or their occupation. See Sunskill Investments Pty. Ltd. v. Townsville Office Services Pty. Ltd. [1991] 2 Qd.R. 210, 215, 220. No more is required by the reference in the agreement here to payment of a proportion of each outgoing “based on the area of the tenancy”, although, as the learned trial judge also observed, the precise method of calculation has the potential to vary with the character or type of the particular outgoing being considered. The formula in the letter of 23 June 1995 is unquestionably not uncertain, or such as to render the agreement less than final, even if in practice it may require some time and reflection to arrive at a firm conclusion about the way in which it operates in particular instances. That, however, presents no reason for the law to incur the reproach of being the destroyer of men’s bargains: cf. Upper Hunter County District Council v. Australian Chilling & Freezing Co. Ltd. (1968) 118 C.L.R. 429, 436‑437.
No doubt in the application of the agreement with respect to outgoings some difficult questions are capable of arising, which it is not presently possible to forecast or resolve without additional information about the character of the particular outgoing in question. In England, under the procedure followed in the old Court of Chancery, the practice was to refer matters of peculiar difficulty to conveyancing counsel to settle drafts of instruments and so on: see Daniell’s Chancery Practice, 5th ed. (1871), vol. 2, at 1046-1048. As far as I am aware, no such practice has ever prevailed in Queensland, where the preparation of instruments for execution pursuant to Court orders has been carried out by the Registrar on receipt of drafts furnished by the parties and, in case of conflict, settled by the Court on application for directions under the provision for liberty to apply commonly reserved in such orders. Fortunately, in the present case, no such procedure is needed now. The learned trial judge prevailed on the parties to agree on a form of lease for execution. We are led to understand that this has taken place, and, although it is accepted that it cannot affect the outcome of the appeal on the substantive matters raised before us, it avoids the need, for this purpose, to examine the proposed lease agreement in greater detail.
It follows from what has been said in these reasons that, in my opinion, the decision below was correct. The appeal should be dismissed with costs.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 8999 of 1997.
Brisbane
Before McPherson J.A.
Pincus J.A.
Derrington J.
[Lend Lease Financial Planning Ltd v. Southcap P/L]
BETWEEN:
LEND LEASE FINANCIAL PLANNING LIMITED
(ACN 056 426 932)
(Defendant) Appellant
AND:
SOUTHCAP PTY LTD
(ACN 002 626 182)
(Plaintiff) Respondent
REASONS FOR JUDGMENT - PINCUS J.A.
Judgment delivered 2 June 1998
I have read the reasons of McPherson J.A. in which the facts and issues are explained. In my opinion the principal difficulty in the case is whether or not the agreement relating to outgoings is sufficiently certain. The letter of 23 June 1995, which is one of the two documents relied on by the respondent, says as to outgoings only:
"Outgoings: Tenant to pay a proportion based on the area of the tenancy to include air conditioning electricity costs.
Electricity and
Cleaning: Payable by tenant".
It can hardly be denied that this left room for argument about the types of expenditure to be included in the expression "outgoings" and the basis on which the liability was to be distributed among the tenants; there is no uniform, commonly accepted, way of dealing with the problem. As was said by Bryson J. in a similar context in Dellwest Pty Ltd v. Cafabe Pty Ltd (Supreme Court of New South Wales, unreported, 26 November 1997):
". . . the law and the Court know no standard clause relating to contributions to outgoings . . .".
Mr Lennon Q.C. argued for the appellant that the learned primary judge had wrongly held the agreement about outgoings to be sufficiently certain and also reached a wrong conclusion as to its meaning. These two points are interrelated. The primary judge’s conclusion on the meaning of the outgoing provisions may be summarised as follows:
The tenant’s share of the cost of insurance is derived from the area of the leased premises divided by the area of the building of which those premises form part. But with respect to rates, because there are two tenanted buildings, the tenant has to pay a proportion that the area of its tenants bears to the entire area of buildings let. If there are vacancies, however, then the landlord must suffer the loss of indemnity for rates; that is, the proportion of rates payable by each tenant would be, if there were vacancies, the area of the tenancy divided by the whole area let or available for letting. The expression "outgoings" includes rates, water rates, management and administration expenses, insurance, external column lighting, fire protection and fire brigade levy, pest control, repairs and maintenance, security, gardening, air conditioning repairs and maintenance, lifts and air conditioning, electricity and lift repairs and maintenance.
The proportion of any outgoing payable by the tenant is to be calculated, in some instances, by dividing by the lettable floor space within the relevant building and in others by dividing by the rentable floor space within the complex as a whole. The former calculation will be used if the outgoing relates only to the relevant building and the latter if the outgoing relates to the complex as a whole.
It is not immediately evident that this expansion of the language the parties used is implicit in that language. Mr Lennon challenged the view that the agreement relating to outgoings necessarily meant that the denominator used should be the tenantable area rather than the area actually tenanted. He said there was no means of determining which of these possibilities the parties intended.
In my opinion there is substance in these contentions and, more generally, in the view that what the parties agreed about reimbursement of outgoings left considerable room for reasonable argument. There was no absolutely certain agreement reached as to what outgoings of the landlord should be reimbursed, nor as to the basis of apportionment.
Nevertheless I am of opinion that the learned primary judge’s decision on this question was correct. My principal reason is that, especially since the High Court’s decision in Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd (1968) 118 C.L.R. 429, courts have been inclined to avoid holding what the parties appear to have regarded as an agreement to be unenforceable, and have striven to ascribe meaning to language employed by the parties, so long as it is not "so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention": Scammell & Nephew Ltd v. Ouston [1941] A.C. 251 at 268, quoted with approval in the Upper Hunter case at 437. A strong example of this approach is to be found in the decision of the New South Wales Court of Appeal in Trawl Industries of Australia Pty Ltd v. Effem Foods Pty Ltd (1992) 27 N.S.W.L.R. 326. Among the difficulties which a majority of the Court was able to overcome in that case was ascribing a meaning to the expression "percentage profit margin", which was held to contemplate a "reasonable commercial profit". It should also be noticed that one of the clauses in the contract which was held to be sufficiently certain said that the parties "shall confer and shall establish" prices for future years (338). Not a great deal can be achieved, however, by pointing to rather vague expressions which have been held to pass muster, in reported litigation; the Court must exercise a judgment as to whether what are said to be uncertainties or incompletely agreed terms throw up such intractable problems as to force the conclusion which I suggest the Court strives to avoid, especially when the parties have acted on the basis that an agreement has been made. An old example of this approach, in a landlord and tenant case, is Oxford v. Provand [1868] L.R. 2 P.C. 135.
I have noted what Young J., in Arjay Investments Pty Ltd v. Morrison’s Outdoor Catering Pty Ltd (Supreme Court of New South Wales, unreported, 1 May 1995), called "guidelines" used in deciding whether there has been a binding agreement. His Honour said that one of the guidelines is that "where one has a lease of commercial premises one normally expects that the lease will only come into existence after there has been an exchange of formal documents", and another is that if "the parties have in mind the preparation of a more formal document by a solicitor, one tends to think that they did not intend to be bound until the formal document was produced and exchanged" (3). For myself, I would respectfully urge that such prima facie rules be used, if at all, cautiously. Experience, at least in this State, suggests that it is not uncommon that rather informal agreements for leases of commercial premises, particularly short leases, are made and acted upon (as in the present case) and I see no good reason why courts should be reluctant to enforce such agreements. If necessary courts must "supplement and flesh out broad agreements": per Young J. in the Arjay Investments case, at p. 3.
To come back to what appears to me to be the central issue, the parties agreement about reimbursement of outgoings, I have noted that in the (English) Encyclopaedia of Forms and Precedents, 4th Ed. Vol. 11, it appears to be taken for granted that a covenant to pay "outgoings" has meaning (p. 74) and, in the current edition of that work, in what is called a "Covenant to pay outgoings - traditional form" an obligation to pay "a fair proportion of all general and water and other rates and other outgoings of an annual or other periodically recurring and non-capital nature" is assumed to be certain (Vol. 23 Form 165). This provides encouragement to think that business people leasing and taking leases of property would regard the parties’ agreement about outgoings in the present case as sufficiently certain to be practically workable.
Subject to the foregoing remarks, I am in respectful agreement with the reasons of McPherson J.A. and with the order his Honour proposes.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 8999 of 1997
Brisbane
Before McPherson JA
Pincus JA
Derrington J
[Lend Lease Financial Planning Ltd v Southcap P/L]
BETWEEN:
LEND LEASE FINANCIAL PLANNING LIMITED
ACN 056 426 932
(Defendant) Appellant
AND:
SOUTHCAP PTY LTD
ACN 002 626 182
(Plaintiff) Respondent
REASONS FOR JUDGMENT - DERRINGTON J
Judgment delivered 2 June 1998
I agree with the decision of McPherson JA that this appeal should be dismissed, and with his reasons.
It is abundantly clear that by the exchange of the relevant letters between them the parties intended to bind themselves to an agreement for a lease at that time, and without any postponement for the production of the formal lease document, that is, the matter comes within the first class described in Masters v Cameron. The circumstantial context included the arrangements at the appellant’s behest for the release of Australian Eagle from its obligations under the prior lease. This predicated a fait accompli of the appellant’s own agreement for lease, and with other factors it strongly supports the finality of the expressions used in the letters forming that transaction.
Then the subsequent mutual conduct of both parties, which is relevant evidence as to their prior intention, further establishes the point. There was entry into possession and payment of rent by the appellant and structural changes begun by the respondent, all far more consistent with a concluded agreement than the contrary. In addition the appellant’s dealing with the lease document was inconsistent with any incompleteness of the agreement. It treated the draft presented to it as the product of an entire agreement rather than an inchoate negotiation. This persisted until its own internal decisions led it to seek a variation to a monthly tenancy. Even then, its approach did not suggest that prior agreement had not been reached.
The detail that had not been settled by the letters did not betray any uncertainty of the agreement. In commercial contracts of this kind, especially where it may be important for the parties to have a mutually binding agreement and know their position securely at an early stage before the fine detail is worked out, the courts will not destroy the contract for the want of certainty where the content of that detail can be discovered by inference or by implication from the arrangements actually made and the surrounding circumstances. This is frequently undertaken to save what the parties had earlier regarded as an established legal relationship. The present case is most suited to the principle applied in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, 436-437.
The decision below was correct and, with respect, entirely for the right reasons.