Daxstar Pty Ltd v Elias
[1998] QDC 47
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- Unreported Judgment
- Daxstar Pty Ltd v Elias[1998] QDC 47
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Daxstar Pty Ltd v Elias[1998] QDC 47
Daxstar Pty Ltd v Elias[1998] QDC 47
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 4060 of 1997 |
[Before Forde DCJ]
[Daxstar P/L v H & S Elias]
BETWEEN:
DAXSTAR PTY LTD | Plaintiff |
AND:
HAYEM AND SOLOMON ELIAS | Defendant |
JUDGMENT
Judgment delivered: | 16th March 1998 |
Catchwords: | Contracts – uncertainty – Equity – specific performance – Estoppel – promissory estoppel |
Counsel: | Mr L Bocabella for the plaintiff Mr C Hampson QC and Mr Jarrett for the defendant |
Solicitors: | Warren Lee & Co for the plaintiff Messrs Drakopoulos Black for the defendants |
Hearing Date(s): | 9 March 1998 |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 4060 of 1997 |
BETWEEN:
DAXSTAR PTY LTD | Plaintiff |
AND:
HAYEM AND SOLOMON ELIAS | Defendant |
REASONS FOR JUDGMENT - FORDE D.C.J.
Delivered the 16th day of March 1998
Introduction
The plaintiff sues for specific performance of an agreement to lease Shop 42 Warren Street, Fortitude Valley, Brisbane including orders requiring the defendant Hayem Elias to execute a lease for Shop 42 for a period of three years with a rental of $1,165 per month. Other relief sought in the action is not necessary at this stage as the question of construction arises which may determine the other matters. The hearing proceeded by way of affidavit evidence with no cross-examination of the deponents.
Background
The defendants, Hayem Elias and Solomon Elias, were the lessors and owners of land situate at 76-78 Wickham Street, Fortitude Valley aforesaid. The defendant Hayem Elias was the lessor and owner of land situate on which were Shops 40 and 42 Warren Street, aforesaid. The shops at 72-78 Wickham Street are on the same corner block as Shops 40, 42 and 46. The latter shops are in Warren Street which runs off Wickham Street. The plaintiff, Daxstar Pty Ltd, had occupied Shop 78 initially pursuant to a three year written lease from October 1988. After the lease expired, it occupied the subject Shop 78 as a monthly tenant. In relation to Shop 76, it held the tenancy from month to month from June 1992 until October 1996. In October 1996 by deed, it was agreed to lease Shops 76 and 78 for some three years. The plaintiff carried on business from the subject premises as a wholesale and retail work uniform business. Exhibit 9 is a list of documents which was handed up by agreement. The original lease relating to Shop 78 is Item 2 and the subject Deed of Agreement dated 25th October 1996 is Item 3.
Nature of Deed
The preamble to the deed refers to the month to month tenancy of Shops 76 and 78. It refers to the wishes of the parties to regularise the arrangement between them and to enter into a formal lease arrangement for a period of three years commencing on 1st November 1996 and terminating on 31st October 1996. It further provides:
“The lessee has agreed that the lease arrangement be by and large pursuant to the general terms and conditions of a former lease held by the lessee from the lessor dated 17th October 1988 and which expired on 30th November 1990 and which was for Shop 78 only subject only to the amendments hereinafter appearing and on the general terms and condition as hereinafter expressed.”
Clause 1 of the deed provided for:
- (a)reference to the demised premises namely Shops 76 and 78.
- (b)the reference to the former lease and that the lease arrangement by and large be subject to the same terms and conditions.
- (c)the period be from 1st November 1996 for three years.
- (d)that the monthly rental be $1,165 with the annual rental of $13,980.
- (e)that the covenants be similar except that Clause 1(p) relating to the costs and expenses of the preparation.
Clause 3 in fact provided that the lessor shall pay all the costs of and incidental to the preparation and execution and stamping of the deed but not including the lessee's own solicitor's costs. Clauses 4 and 5 provided as follows:
“4. The Lessor hereby covenants and agrees with the Lessee that in the event of the Lessee wishing to relocate the premises from 76 - 78 Wickham Street, Broadway to premises at 42 Warren Street, Fortitude Valley owned by one of the Lessors namely Hayem Elias then provided that the election is made no later than six (6) months from the date of commencement of this Agreement namely no later than 30 April 1997 then the Lessor shall agree to accepting a surrender of the Demised Premises subject always to the Lessee signing a new lease for a period of three (3) years of the premises located at 42 Wickham Street, Fortitude Valley and owned by the said Hayem Elias.
- The rental for the premises situated at 42 Warren Street, Fortitude Valley shall be the same as for the Demised Premises namely the sum of ONE THOUSAND ONE HUNDRED AND SIXTY-FIVE DOLLARS ($1,165) per calendar month for the full three (3) year term.”
What is not clear from the deed is the commencement date of a lease in respect to 42 Warren Street once the lessee elected to relocate.
Counsel for the plaintiff submitted that the date could be either 1st January 1997 or 1st March 1997 which was his first contention. It is pleaded in paragraph 5 of the plaint that in or about January 1997, the plaintiff elected to relocate to Shop 42 Warren Street and in March 1997, vacated the Wickham Street premises. It is not in dispute that the plaintiff made the appropriate election prior to 30th April 1997. It seems also to be common ground given paragraph 29 of Exhibit 11 that the plaintiff did vacate the Wickham Street premises altogether and moved to Shop 42. It should also be noted that the plaintiff was the occupier of Shop 46 which is adjacent to Shop 42. It is only in respect of Shop 42 to which the present action relates. By letter dated 28th August 1997 the defendant Hayem Elias served upon the plaintiff notice to deliver up possession of Shop 42. This was after protracted negotiations between the parties as to what should or should not be part of the lease agreement. The defendants contend that the plaintiff no longer has any entitlement to a lease.
It is submitted by Mr Hampson QC on behalf of the defendants that the issue falls to be determined upon the proper construction of Clause 4 of the deed between the parties made on 25th October 1996. The agreement is expressed to be “subject always to the lessee signing a new lease for a period of three years” of Shop 42. To that extent, it is submitted that the arrangement falls within the third class of case established by Masters v Cameron (1954) 91 C.L.R. 353 at 361. The defendants submit that on its proper construction, Clause 4 is nothing more than an agreement to agree that the terms and conditions of the new lease (apart from those matters expressly dealt with in Clause 4) remained to be agreed. That is to say, no binding agreement to give a lease on any particular terms came into existence. It was further submitted that it is clear from the correspondence which has ensued between the parties that no agreement as to the terms of the lease was ever reached.
The alternative argument put by the defendants was that if the terms and conditions of the new lease of Shop 42 were agreed in the deed, the lease is clearly conditional upon the execution of formal instrument of lease, that is to say it is an agreement which falls within the second class of cases in Masters v Cameron. The plaintiff submits that the lease was to be upon the same terms and conditions of the lease in respect of Shops 76 and 78. Although the submission by the defendants says that the plaintiff waived its right to insist upon a lease in such terms, Mr Hampson explained this by saying that the defendants did not rely upon legal waiver as that had not been pleaded, but rather the course of conduct would seem to indicate that the parties were still negotiating and that the plaintiff was not insisting upon a lease in terms of the old lease.
Areas of Contention
Exhibit 12 is the plaintiff's summary of the main points in issue. The variations sought by the defendant Hayem Elias to the original lease were as follows:
“(a) The term is not for three years from when the option was exercised but was for a little over 2.5 years;
- (b)The new lease sought to have the plaintiff take over responsibility for plumbing maintenance and install a sanitary disposal system (see clause 16 of the old lease and clause 166 & 1(ff) of the draft lease.
- (c)The draft lease required the plaintiff to take out improvements (See clause 1(a)(ii)) but the old lease in 1(ee) made fixtures the property of the defendants as the draft in general terms in 1(dd);
- (d)Plus clause 1 (a)(ii) of the draft lease required the plaintiff to upgrade the premises further in respect of carpeting, when the existing carpet was worthless.
- The defendants also required the plaintiff to install security grills (see FSU 23).”
The defendants submit that the plaintiff had no intention of entering into a lease in the same terms as that applicable as Shops 76 and 78 but rather was intent upon negotiating for itself a fresh lease on what are considered to be more favourable terms. The defendant relied upon Sargent v ASL Development Pty Ltd (1974) 131 C.L.R. 634. At 641, Stephen J. stated:
“The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurity. The doctrine only applies if the rights are inconsistent for one with the other and it is this concurrent existence of inconsistent sets of rights which explains a doctrine; because they are inconsistent neither one may be enjoyed without the extension of the other and that extension confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence.”
At 642, he continued:
“Thus in the common case of avoidance of a contract for breach it is not any doctrine of election that prevents the avoiding party subsequently from enforcing the contract but rather the fact that the contract has by his own act of avoidance, ceased to exist;”.
Also at p.642:
“For the doctrine to operate there must be both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which he possesses.”
In the present case, I find that Mr Dunsmore acting on behalf of the plaintiff, never resiled from the position that a lease ought to be effected. The question was whether it could be drafted in such terms as to meet the convenience of both parties or to be “fair and equitable”. The fact that negotiations occurred in the circumstances of this case does not, I find, necessarily mean that he was abandoning or avoiding Clause 4 of the deed. It may have led to a more harmonious relationship between landlord and tenant if the parties could agree to the subsidiary terms referred to in Exhibit 12. However, as pointed out by Mr Boccabella who acted for the plaintiff the solicitors for the plaintiff at various stages asserted the position that the defendant ought to execute a lease: Exhibit 9 Item 5, Item 8 and Item 14.
In the present case, time was not of the issue. The plaintiff had moved into Shop 42 and genuine negotiations continued for some months. It could not be said that the main points of contention were “essential” terms of the lease. The most contentious related Clause 1(a)(ii) concerning the carpeting and the condition of the floor on termination. By a letter of 10th July, 1997 (Exhibit 9 Item 29) the defendants' solicitors seemed content with reinstatement or leaving the wooden floor and carpet tiles. The other point concerned the toilets and plumbing and who would be liable. The roller security grille did not form part of any condition of the offered lease, but was mentioned in the letter of 7th August, 1997. Clause 1 (dd) was insisted upon. The effect of this would have been to vest ownership of the timber floor and the carpet tiles in the defendant. In my view the essential terms had been agreed upon in the deed. Any conduct on the part of the plaintiff was an attempt to resolve the differences arising out of the offered lease. The facts can be distinguished from Ogle v Comboyuro Investments Pty Ltd (1976) 136 C.L.R. 458. In that case there was conduct by the purchaser Mr Ogle evidencing an intention not to complete the contract within a reasonable time. The willingness of the plaintiff in the present case to resolve the contentious issues did not amount to a waiver of a breach of an essential term viz. to complete a new lease subject to the deed as agreed.
The following passage from Ogle's case is apposite:
“These circumstances must be distinguished from the circumstances where the breach of the agreement is not unconditionally waived but further time is allowed on condition that completion takes place at the further nominated time”.
(Gibb J, Mason J and Jacobs J p.459).
In my view, the plaintiff gave the defendant Hayem Elias further time to resolve the outstanding issues whilst relying on the essential terms agreed to in the deed.
This last communication occurred on 14th February 1997. There were subsequent communications between the parties up until August 1997. By letter dated 28th August 1997, the solicitors for the defendant Hayem Elias withdrew the offer of the lease on the premises at Shop 42 Warren Street. The differences between the parties as to what should be in the draft lease require some consideration.
Proposed Conditions in Draft Lease
In a schedule accompanying their submissions, the defendants set out what clauses in the offered or draft lease were relevant to the 1988 lease and which could not be agreed upon. The main thrust of the plaintiff's submission is that the parties were to agree “by and large on the terms contained in the original lease being Item 2 Exhibit 9”. Some support for that is contained in a letter from the defendants' solicitors dated 7 April 1997 which accompanied the offered lease. (Item 19 Exhibit 9) It states:
“Please be advised that the lease by and large is in the same format as the lease for the former premises of our client company in Wickham Street, Fortitude Valley.”
Of course, some modification was necessary given the premises were different.
The original intention which appears from the deed (Item 3) is that the lease in relation to Shops 76 and 78 was to be similar to the original lease for Shop 78. Clause 4 then went on to provide for a relocation from 76 - 78 Wickham Street to Shop 42 which is owned solely by the defendant Hayem Elias. It was to be subject to a new lease for three years. When one peruses a letter of 10th February 1997 (Item 9 Exhibit 9) the following statement appears:
“It would seem to us that there be no need for further documentation other than an exchange of letters agreeing to substitute Shop 42 Warren Street, Fortitude Valley for 76-78 Wickham Street, Fortitude Valley as set out in the deed dated 25th October 1996.”
It is therefore open to infer from the background to the leasing arrangements that any lease of Shop 42 be by and large in terms of the original lease with the necessary adaptations to provide for the change of venue.
In fact, in the letter of 10th February 1997 from the defendants' solicitors, the requirements at that stage which were set out therein relating to grilles, wash basin and taps etc. were made as a condition of handing back Shop 42 to the plaintiff. There was no suggestion that any of those terms were to form part of any lease arrangement. Those types of matters are often resolved after the main terms and conditions of a lease are agreed upon.
Unfortunately, the plaintiff's demand for lease to Shop 40 was part of its requirement for a registered lease to be brought into effect. This clouded somewhat the plaintiff's position, but the end result as appears from the correspondence was that in any event it required a lease in relation to Shop 42. It was not until the offered lease was presented that different terms and conditions were imposed by the defendant.
Clause 1(a)(ii)
This imposed an obligation to reinstate the premises and an extra obligation upon the company to lay new replacement carpet in the premises. It had no counterpart in the lease dated 17th October 1997.
Clause (dd) on page 6 of the lease (page 63 Exhibit 9) provided that if the lessee with the permission of the lessor did construct improvements, fixtures or floor coverings, then they would become the absolute property of the lessor without compensation to the lessee.
Clause 1(dd)
This had an equivalent in 1(ee) of the original lease.
Clause 1(o)
This required the lessor to pay all of the costs of stamping and any consent from the mortgagee. This had an equivalent in the old lease in 1(p).
Clause 16
This requirement in the offered lease required the lessee to keep the toilet facilities on the first floor of the building in a clean and tenable condition etc. Clause 16 added that the lessee shall provide a sanitary bin in the ladies' toilet and be responsible for regular disposal of same. Clause 16 of the old lease did not have that provision.
Clause 1(u) and cost of plumbing, drainage and mechanical facilities
In a letter, the defendants also required the plaintiff to install security grilles. The plaintiff refused to do so. This does not seem to have become part of any clause of the draft lease. Clause 1 (u) of the offered lease was similar to Clause 1 (v) of the old lease but was amended by letter. In relation to the other clauses referred to above, the defendants submit that there was no agreement in relation to three of those matters but that the clause relating to the lessee paying the costs was agreed to be deleted.
Clause 1(x)
The offered lease required a separate water meter by virtue of the change of shop. Clause (y) of the old lease said that if a separate water meter be installed then the lessee was to pay for those costs. That clause remained by agreement.
Clause 6
This provides that the lessee shall not flood the floor of the demised premises with water etc. and would pay for any damage which arises from seepage of water etc. A similar provision is to be found in Clause 6 of the old lease. The plaintiff was not willing to have this term inserted as there was some problems with the guttering prior to their taking possession. This is a letter of 16th May 1997. Obviously, this came to the notice of the plaintiff's after entering into possession of Shop 42. It probably would not have been something which would have been the basis for objection if the defendants had tendered a draft lease in similar terms to the old lease.
Clause 13
This clause was common to both leases and remained. It related to cleaning the premises.
Clause 1(b) of Guarantee and Indemnity
This was in addition to the lease which had no equivalent in the old lease.
Clause 1(ff)
This provided that the lessee shall be responsible for the maintenance and repair of all plumbing installations in the demised premises including the toilet and hand basin. In the old lease, the provision related to the lessee paying for any additional plumbing installation, drainage, electrical or other work. Obviously this was an added burden to the lessee. No agreement was reached in relation to this clause or the clause relating to the guarantee.
Clause 1(gg)
In the offered lease, the lessee was to be responsible for the maintenance of all electrical installations, fixtures, fittings and power outlets for the duration of the lease. Clause 1(b) of the old lease was a more general clause requiring the lessee to keep the demised premises in tenantable repair, order and condition. No agreement was reached in relation to this aspect.
Clause 18
Clause 18 of the offered lease was in similar terms to Clause 19 of the old lease. This was further alleged by the defendants that no agreement was reached in relation to this stop.
Clause 32
This required that the lessee do not carry on deep fried cooking etc. There is no such equivalent in the old lease.
Clause 33
This required the lessee not to conduct any kind of painting, panel beating or spray painting. There is no such equivalent in the old lease.
The submissions of the defendant in essence were that many of these clauses were not agreed to notwithstanding some of them were contained in the old lease. It showed, the argument continued, that there was no intention on the part of the plaintiff to assert that the terms of the old lease were appropriate to the new lease. That submission must be taken in light of the fact that once the defendants introduced new terms into the offered lease, there were negotiations with the plaintiff through Mr Dunsmore to meet some of their demands. It is consistent with his trying to maintain a harmonious relationship with the landlord. It does not in my view amount to an abandonment or election by him to insist upon a new lease in terms of the old lease with adaptations to meet the description of Shop 42. One gleans from the affidavit of the defendants that the circumstances relating to Shop 42 being outfitted required attention to detail for renovations and a requirement for security and other maintenance aspects. For example, Mr Hanlon, a carpenter, swore an affidavit to the effect that the existing carpet in Shop 42 was in very poor condition and in fact worthless. He took the carpet to the dump. In the offered lease, the defendants were insisting that the plaintiff remove the timber floor and reinstate the floor covering with carpet to be of similar quality and colour to the carpet behind the partition. One objection by the defendants was that the floor level was higher than the original floor. They believed the best course was for the plaintiff to reinstate the floor to its original flat condition. They agreed to the new carpet on the basis that it would be left behind.
Also, in relation to the toilets for example, the defendants were concerned that given that the tenants moved out from this floor that it was reasonable for the plaintiff therefore to pay for the cost of maintaining the toilet. These were changing circumstances as the facts developed and do not assist the defendants in defining what their legal obligations were pursuant to the deed and the understanding between the parties. I find, that the terms of the old lease would be the basis by and large for any new lease. The defendants, for example, complained that the plaintiff removed a security grille at the front of the shop and insisted upon a roller grille being provided by them. The defendants seemed concerned about security but it never became a term of the offered lease.
Mr Dunsmore in his affidavit dealt with the various offered clauses relating to the old lease. He said that in paragraph 41 of his affidavit filed on 16th February 1998 that by July 15 there were three issues only to be decided between the plaintiff and the defendant Hayem Elias in relation to the lease for Shop 42. See Item 30 Exhibit 9. Those areas were:
A the defendant Hayem Elias required to be paid rent for Shop 42 for the months of January and February 1997.
B the plaintiff did not wish to be solely responsible for the costs associated with the communal toilets.
C the defendant Hayem Elias wanted the plaintiff to leave its carpet tiles in the premises following the exploration of the lease or to lay carpet of similar quality and colour throughout the entire premises of Shop 42.
In the last paragraph of the letter of 15th July 1997, solicitors for the plaintiff asserted that their interests were “interested in arriving at a lease which is fair and equitable between the parties”.
This particular concession was taken by counsel for the defendants to mean that the plaintiff did no longer rely upon the requirement that the lease be in terms of the old lease. In my view it is also consistent with a tenant wishing to meet the demands of a landlord to promote a harmonious relationship. It does not in my view amount to an election to abandon its legal rights.
In fact if one looks at the letter of 7th August 1997 (Item 31 Exhibit 9) the defendants' solicitors make the following points:
- (a)“Our client is concerned that the lack of action on the part of your client company with regard to the installation of a roller security grille for the front of the premises at 42 Warren Street”.
This amounts to more of a plea rather than insistent on a condition of a lease. It is in the same context of a complaint about the plaintiff's staff parking in the building's courtyard area. There is also a complaint about the toilets running and possible excess water rates being charged.
- (b)The defendants insisted upon the wooden floor and the carpet tiles remaining in the premises at the conclusion of the lease. On the other hand it insisted upon 1(dd) being kept in the lease, namely that any improvements, fixtures or floor coverings become the absolute property of the lessor.
- (c)Unpaid rent for January and February 1997.
This relates to the period prior to the point of leaving Shops 76 and 78. It was during the period that renovation work was being undertaken by the plaintiff.
On the view that I take as to when the lease commenced, it is in my view a separate issue.
Legal Principles Applicable
The courts will not lend their aid to the enforcement of an incomplete agreement where the parties have reached an agreement to agree at sometime in the future: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 C.L.R. 600 at 604.
In the present case, Clause 4 of the deed (Item 3 Exhibit 9) provided for the following:
- A description of the property to be leased namely Shop 42 Warren Street.
- A date by which the election to relocate from Shops 76 and 78 had to be made, namely 30th April 1997.
- The period of the lease namely three years.
Paragraph 5 provided for the rental to be $1,165 per calendar month for the full three year term.
Because of the nature of this agreement, a specific commencement date could not be nominated. It was dependent upon whether in fact the plaintiff elected to relocate and when that election was made and when effect was given to that election.
It could be said that no concluded agreement was ever reached as to the commencement of the term. In South Coast Oils Pty Ltd v Look Enterprises Pty Ltd (1988) 1 Qd.R. 680 at 695, a similar question arose. The trial judge had set a particular date for the commencement of the lease. Connolly J said that in determining that date, the trial judge may have been of the view that an agreement for lease would ordinarily, where a commencement date is not specifically agreed to, be for a term which runs from the date of the agreement (page 696). In that case, that date would be 25th October 1996. However, Connolly J said that that approach could not stand with other authorities which dealt with that point. In making reference to Jopling v Jopling (1909) 8 C.L.R. 33 at 39, Connolly J quoted from the judgment of Griffiths CJ who was commenting upon where an agreement to grant a lease is made, it does not necessarily mean that the lease is to commence from the day on which the agreement is made. The Chief Justice said:
“Of course it does not. But this is a case of verbal agreement for a lease followed by taking possession and pursuance of the agreement.”
Connolly J added that the agreement coupled with the entry created a term, the commencement of which was of course certain. In the Look Enterprises case that was not the situation. In the present case, the plaintiff vacated Shops 76 and 78 and commenced his business from the subject Shop 42 on or about 1st March 1997. Work had been carried out on Shop 42 in the previous two months. That is the subject of a separate claim in the correspondence for rent owing. In my view the 1st March 1997 is the commencement date of the lease, given the nature of this agreement and the fact that the plaintiff commenced business from the premises on that date. The nature of the agreement also points to the fact that notwithstanding the deed was entered into on 25th October 1996, that there would have to be a different date for the commencement of any new lease subject to giving effect to an election to relocate. Rent was paid from that date and accepted by the defendant Hayem Elias. The learned trial judge had found that the plaintiff in the Look Enterprises case was to have possession of the site from 25th June 1985. That is when, for practical purposes, construction was completed. In the present case, the preliminary work was carried out to allow the plaintiff to operate out of Shop 42 from 1st March 1997. The defendants were aware of the requirement for work to be done and accepted rent from that date. In my view, the relocation from Shops 76 and 78 to Shop 42 defines the date of the commencement of the new lease. The defendant, Hayem Elias, was, I find at all material times, aware of the nature of the building work prior to the plaintiff taking possession of Shop 42.
The Court of Appeal in the Look Enterprises case did not agree with the learned trial judge's determination of the commencement date. Shepherdson J at 702 quoted from the Bishop of Bath's case (1605) Corep 340 at 363:
“A contract for a lease is enforceable notwithstanding that the commencement of the term may be expressed by reference to the happening of a contingency which is at the time uncertain, provided that, at the time that the contract is sought to be enforced, the event has occurred and the contingency has happened.”
That principle is apposite to the present case and in my view supports the finding that the lease commenced on 1st March 1997.
Masters v Cameron
The defendants submitted alternately in this regard. Either that the facts support a finding that it is the third category of the Masters v Cameron decision. Alternatively, if the terms and conditions of the new lease of Shop 42 were agreed to in the deed, the lease was conditional upon the execution of a formal instrument of lease. That is, an agreement which falls into the second class of cases in Masters v Cameron. It was originally submitted by the defence that the plaintiff has, by its conduct, waived its right to insist upon a lease provided for in the deed terms. It should be pointed out that Mr Hampson QC did not rely upon a waiver in the legal sense but merely that the conduct of the plaintiff through its solicitors in conducting a negotiated settlement of the terms of the lease was inconsistent with reliance upon a new lease in terms of the old lease. As discussed, the parties had agreed upon the main aspects of this lease. Connolly J in the Look Enterprises case at 698, discussed the findings of the learned trial judge in that instance. He said:
“His Honour recognised that it was in contemplation that a formal written lease would be prepared and that it was also expected that a letter of intent would be prepared and sent by Look Enterprises to South Coast Oils, but his Honour expressed himself as ‘satisfied that neither Look nor Bonner considered that he had only entered into an agreement which was nothing more than provisional and still subject to the execution of a formal agreement to be prepared by the solicitors’. Bonner had conceded that a number of topics would, in his expectation, have been dealt with by the solicitors and included in a written instrument of lease.
Of course, the fact that the plaintiffs have agreed that there shall afterwards be a formal agreement prepared embodying the terms of their contract does not of itself show that they continue merely in negotiation. See the speech of Lord Blackburn in Rossiter v Miller (1878) 3 App.Cases 1124, 1151. It will ordinarily be the expectation on the parties that their solicitors will insert non-contentious common form provisions. The point made by Lord Blackburn is that the contract is complete as soon as it is established that those who do up the formal agreement have not the power to vary the terms already settled. If those terms include the essentials of a contract of the type under consideration, a concluded contract has come into existence.”
In my view, such a situation exists in the present case. This is particularly so where there is reference in the deed to the original premises, namely Shop 78 which was the subject of the old lease. If relocation had not occurred, then the lease to be entered into by the plaintiff was to be “by and large pursuant to the general terms and conditions of a formal lease” (the old lease). The solicitors for the defendants recognise that in their letter of 10th February 1997 (Item 9 Exhibit 9). They believe that exchange of letters was all that was necessary to give effect to the leasing arrangements. There was some practical difficulties in that respect by attempting to give effect to the deed by a mere exchange of letters when the deed was not appropriate in all respects for Shop 42. The plaintiff's solicitors, whilst insisting upon a lease in registerable form were merely giving effect to Clause 4. The additional requirement of registration, it was conceded, is of no moment in the present case.
The second category of Masters v Cameron was discussed in Freedom v A.H.R. Constructions Pty Ltd (1987) 1 Qd.R. 59. Before discussing that case, it is timely to quote from the actual decision in Masters v Cameron ibid at 360:
“Where parties who have been in negotiation reach agreement upon terms of a contractual and nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be 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. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v. Miller (1878) 3 App.Cas. 1124 when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation, his Lordship proceeded: ‘...as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed’ (1878) 3 App.Cas., at p. 1151: see also Sinclair, Scott & Co Ltd v Naughton (1929) 43 C.L.R. 310, at p.317. A case of the second class came before this Court in Niesmann v Collingridge (1921) 29 C.L.R. 177 where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made ‘on the signing of the contract’. Richard Starke JJ observed (1921) 29 C.L.R., at pp. 184, 185 that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox C.J. held that there was no difficulty in decreeing specific performance of a stipulation of the agreement necessary to its carrying out and due completion’ (1921) 29 C.L.R., at p. 185: see also O'Brien v Dawson (1942) 66 C.L.R. 18, at p.31.”
Freedom's case is authority for the proposition that there is no difficulty in decreeing specific performance of an agreement which fell into the second category of Masters v Cameron, (p.69) McPherson J (as he then was) said that that would include the execution of the formal document itself. The passage at p.68 is apposite of the present case:
“In these peculiar circumstances it seems to me that the execution of a formal contract in the present was not and cannot have been regarded by the parties as a condition precedent to the creation of binding contractual obligations. Execution of a documentary contract was no doubt regarded as essential at least by the plaintiff and probably also by both sets of solicitors; but it was an essential part of performing, not of making, their contract. In that respect the case more closely resembles the second class mentioned by the High Court in Masters v Cameron(supra). It was a case of a contract binding the parties to join in bringing a formal contract into existence. It differs from cases in the second class in that it was not that formal contract but the antecedent agreement that was intended to be carried into execution. The formal documentary contract was merely a step in the course of performing the antecedent agreement.”
For completeness, I refer to the decision of Jopling v Jopling (1909) 8 C.L.R. 33 at 39. A court of equity will grant specific performance where a commencement date for example is partly made out from the agreement itself and partly to be inferred from the conduct of the parties.
Finally, it is relevant to cite the observations of Connolly J in Look Enterprises at 695:
“A man may agree to buy or to take a lease of a house to be constructed, the proposed curtilage being identified by unsurveyed plans. When the house is built then its curtilage is identified on the ground, questions may of course arise whether in some respects there is substantial disconformity between the area tendered in performance and that bargain for or between details of the building as constructed and those described in the contract. But these are problems which arise after the making of a contract and say nothing to the certainty or otherwise of the contract. An agreement to take a lease of premises is to be developed is solely certain.”
In my view, the differences of opinion as to the matters referred to previously do not affect the certainty of this agreement. They are problems which often arise after the making of a contract of heads of agreement in lease arrangements. The fact that Mr Dunsmore took a conciliatory approach to determining areas of dispute do not in my view amount to an election volume to abandon his right to a new lease in terms by and large similar to the old lease.
Estoppel
It is pleaded in paragraph 6 of the plaint and supported by the affidavit evidence that the plaintiff in performance of the deed (in part or in total):
- (a)commenced and expended monies on substantial refurbishment work in Shop 42 Warren Street.
- (b)relocated its business from Wickham Street premises to Shop 42 Warren Street.
- (c)paid rent to the defendant specifically from 1st March 1997 and indeed surrendered the lease of the Wickham Street premises.
- (d)continued to carry on its business at 42 Warren Street after surrendering the said lease.
Although for want of exchange of parts no binding lease had been executed, the defendant Hayem Elias was estopped in my view from denying he was bound: Waltons Stores Interstate Ltd v Maher (1987-1988) 164 C.L.R. 387.
It was submitted by Mr Hampson that the fact that the defendant knew that the plaintiff had expended money and time on it was a matter for them, just as they had surrendered the lease. It was the plaintiff's election to do what it did. The defendants did not force them to go and effect changes to Shop 42. It was submitted that the defendants, although they knew what the plaintiff was doing, they acted in good faith. Reference was made specifically to a question of advertising and I do not rely upon that in relation to the question of detriment for the reasons argued by Mr Hampson.
I refer to my previous findings that certainty had been reached between the parties pursuant to Clauses 4 and 5 of the deed. It was in my view unconscionable for the defendant Hayem Elias to attempt to submit a lease different in substance in some respects when he was aware that the plaintiff had made improvements and moved its operation to Shop 42 as at 1st March 1997. The offered lease was not tendered until April 1997 when the changes were encapsulated in the draft. Prior to that, the only point of substance was the security grille aspect. This in fact did not form part of the offered lease conditions. Therefore, it does not assist the defendant to say that the plaintiff was really seeking a fair and equitable lease when in fact the defendant Hayem Elias had, by his conduct, clearly encouraged to induce the plaintiff to continue to make improvements on the assumption that a three year lease had been agreed to in terms of the deed. In my view, the defendant Hayem Elias is estopped in all the circumstances from retreating from his implied promise to complete the lease agreement: Waltons Stores Interstate op cit 407-8, Mason CJ, Wilson J.
Orders
It is declared that paragraphs 4, 5 and 6 of the deed executed by the plaintiff and the defendants and dated 25th day of October 1996 constituted a binding agreement between the plaintiff and the defendant Hayem Elias and that the said agreement ought to be specifically performed and carried into execution and it is ordered accordingly.
It is further ordered that upon the plaintiff executing and delivering to the defendant Hayem Elias a lease of the demised premises located at 42 Wickham Street, Fortitude Valley comprised in the said agreement for the term and the rent therein mentioned such lease to commence on 1st day of March 1997, the defendant do execute and deliver to the plaintiff the said lease duly signed.
It is further ordered that in the event of the failure by the defendant Hayem Elias to execute the said lease within 28 days of delivery to his solicitors that the registrar of the District Court be empowered to execute same on his behalf.
It is further ordered that the defendants do pay the plaintiff's costs of and incidental to the action including reserved costs, if any, to be taxed.
And the parties are at liberty to apply.