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  4. Gear Nominees Pty. Ltd. v Community Agency for Development, Employment and Training Inc. - [2002] QDC 259

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Gear Nominees Pty. Ltd. v Community Agency for Development, Employment and Training Inc.[2002] QDC 259

Gear Nominees Pty. Ltd. v Community Agency for Development, Employment and Training Inc.[2002] QDC 259

DISTRICT COURT OF QUEENSLAND

CITATION:

Gear Nominees Pty. Ltd. v. Community Agency for Development, Employment and Training Inc. [2002] QDC 259

PARTIES:

GEAR NOMINEES PTY LTD(Plaintiff)

And

COMMUNITY AGENCY FOR DEVELOPMENT, EMPLOYMENT AND TRAINING INC.(Respondent)

FILE NO/S:

173/00

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court, Maroochydore

DELIVERED ON:

14th October 2002

DELIVERED AT:

Maroochydore

HEARING DATE:

7th October 2002

JUDGE:

Judge J.M. Robertson

ORDER:

Judgment for the plaintiff for $36,762.50. The defendant to pay the plaintiff’s costs of the claim on the indemnity basis.

CATCHWORDS:

CONTRACT – Formation – Parties signed “Letter of Intent to Lease” containing clause that a lease would subsequently be entered into – Defendant took possession – no formal lease executed – whether binding agreement existed

Cases cited:

Elders Trustee Co v. Commonwealth Homes and Investment Co. Ltd. [1942] 65 CLR 603

Khoury v. GIO NSW [1983-84] 165 CLR 622

Sargent v. A.S.L. Developments Ltd. [1974] 131 CLR 634

Chester v. Buckingham Travel Ltd [1981] 1 W.L.R. 96

Lend Lease Financial Planning Limited v. Southcap Pty. Ltd. [1997] QCA 8999

Air Great Lakes v. KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309

South Coast Oils Pty Ltd v. Look Enterprises Pty Ltd [1988] 1 Qd.R. 680

Rossiter v. Miller (1878) 3 A.C. 1124

Masters v. Cameron (1954) 91 CLR 353

Drinkwater v. Caddyrack Pty Ltd (1997) unreported judgment of the Supreme Court of New South Wales, Matter No. 3970196

Sinclair, Scott & Co v. Naughton (1929) 43 CLR 310

Baulkham Hills Private Hospital Pty Ltd v. GR Securities Pty Ltd (1986) 40 NSWLR 622

COUNSEL:

M.E. Eliadis (for the Plaintiff)

J.B. Sweeney (for the Defendant)

SOLICITORS:

Gary Gear & Associates (for the Plaintiff)

Heiner & Doyle (for the Defendant)

  1. [1]
    The plaintiff’s claim is for damages for breach of contract. The claim for specific performance was abandoned by the further amended claim filed the 12th June 2001.
  1. [2]
    It is common ground that the parties entered into an agreement to lease premises at Unit 3, “Commerce Chambers” 111-113 Aerodrome Road, Maroochydore (the property) on or about the 21st December 1999 for a term of two years from the 28th January 2000 at a yearly rent of $20,400 payable monthly in advance (the agreement); and that the defendant occupied the premises and paid rent in advance until it vacated on the 30th June 2000.
  1. [3]
    The agreement is document no. 1 in Exhibit 1. Clause 20 of the agreement provides:

“LEASE DOCUMENTS:

The Lessee must sign the lease within 21 days of submission of the same by the Lessor’s solicitor.

The Lessee must pay all reasonable costs but not limited to the preparation, negotiation, execution, registration and stamping of the Lease and Lease Plan Survey costs, except for the case of retail lease which is then covered by the Retail Shop Leases Act 1994.”

  1. [4]
    On the 24th January 2000 the plaintiff’s Solicitor Mr Gear (who is also the sole shareholder and director of the plaintiff) forwarded a draft lease to the defendant’s Solicitor Mr Heiner of Messrs Heiner & Doyle. Clearly this is outside the 21 day period required by Clause 21; however there was no complaint from Mr Heiner on this ground. Mr Gear had been away on annual holidays from his Mt Isa practice. Nothing appears to have happened until the plaintiff wrote directly to the defendant on the 8th March 2000 (Document 3 in Exhibit 1). At this point in time, neither party seemed to regard the agreement to lease as a binding contract. The following day Mr Heiner wrote to Mr Gear (Document 4 in Exhibit 1) in which he, in effect, commenced negotiations on behalf of his client in relation to the draft lease previously forwarded by Mr Gear. Mr Gear replied by facsimile on the 15th March 2000 (Document 5 in Exhibit 1) in which he agreed to some of Mr Heiner’s requests but not others. He wrote:

“Please advise us on or before 21 March 2000 as to whether your client wishes to proceed with the lease of the premises …”.

  1. [5]
    On the 24th March 2000, having received no response from Mr Heiner, Mr Gear sent a facsimile to Mr Heiner which states in part:

“… notice is hereby given for your clients to vacate the premises on or before 30 April 2000.”

At the same time he caused a notice to quit to be forwarded to the defendant.

  1. [6]
    At trial, it was accepted by Mr Eliadis on behalf of the plaintiff that this action by Mr Gear constituted a breach of the agreement and a repudiation of it by the plaintiff. Mr Gear explained in evidence that he took this action out of frustration and in an effort to achieve some finality. As I have noted, it is accepted that both he and Mr Heiner were then of the mistaken belief that the agreement was not an agreement to lease the premises for two years on the terms and conditions set out therein.
  1. [7]
    His actions brought an immediate response from Mr Heiner. There were a number of telephone calls in which it was agreed that they would talk at length at 4.00pm on that day about the matter. Both Solicitors made diary notes at the time, but understandably they are short and somewhat cryptic and do not represent all that was said in a conversation that extended over 20 minutes. It is common ground that credibility is not an issue in the trial, and for my purposes it is unnecessary to resolve the matters of difference. I am satisfied that the Solicitors discussed a number of contentious issues which arose out of the earlier correspondence, and in particular the issues of signage, car parking, air-conditioning and Clause 15.6 of the draft lease which is in these terms:

“Closing of the Building

The Landlord reserves the right at any time and from time to time for any periods it sees fit to close all or any of the entrances to the Building and/or to close off the whole or any part or parts of the Building and while all the entrances to the Building are closed the Tenant and its servants agents customers licensees and invitees will not enter or leave the Building except with the permission of the Landlord.”

  1. [8]
    After this conversation with Mr Gear, Mr Heiner sought instructions from his client. He dealt with Mr Gerritse who was authorised by the defendant to provide Mr Heiner with binding instructions. He tendered written advice to Mr Gerritse on the 27th March 2000, and that advice is in evidence (Exhibit 5). Despite the tenor of the advice, Mr Heiner received instructions from the defendant to proceed, and on the 28th March 2000 Mr Heiner wrote to Mr Gear (Document 8 in Exhibit 1) in these terms:

“I have now received instructions that CADET will accept a lease, incorporating the changes which are referred to in your fax of 15 March.

Please submit execution copies of the lease as soon as possible.”

  1. [9]
    On the 29th March 2000 Mr Gear forwarded to Mr Heiner the lease, statutory declaration and a memorandum of costs and outlays (Document 9 in Exhibit 1). On the 3rd April, Mr Heiner sent a facsimile to Mr Gear (Document 10 in Exhibit 1) in which he requested authority to make a number of changes to the lease, none of which related to the previously contentious issues set out in Exhibit 5. He stated:

“Upon receipt of your confirmation that it is in order to amend the documents, I will do so and have my client execute them.”

On the 7th April, Mr Gear authorised Mr Heiner to make those changes. On the 10th April, Mr Gear’s costs were paid in full by the defendant. On the 13th April, the defendant paid a month’s rent in advance, and again on the 11th May 2000.

  1. [10]
    The lease forwarded on the 29th March was never executed. On the evidence there was no further contact between the parties until, on the 30th May, Mr Heiner forwarded a notice to the defendant pursuant to s.131 of the Property Law Act 1974, advising the plaintiff that the defendant would quit the premises on the 30th June 2000 (Document 12 in Exhibit 1). The defendant wrote to Mr Heiner the next day inter alia in these terms:

“Does your client intend honouring the agreement entered into between the parties, and confirmed in subsequent correspondence?” (Document 13 in Exhibit 1)

  1. [11]
    On the 1st June Mr Heiner informed the defendant (Document 14 in Exhibit 1):

“It is CADET’s position that no concluded Agreement for Lease has ever been entered into. The draft lease you sent me on 29 March was not acceptable to CADET.

It is CADET’s position that its occupation of the premises was that of a periodic tenant, and that that periodic tenancy was lawfully terminated by Notice to Landlord given on 30 May 2000.”

  1. [12]
    As I have noted, there is really no relevant dispute about the facts. It is the legal effect of the acts and declarations of the parties that is in dispute.
  1. [13]
    The plaintiff’s position, as articulated by Mr Eliadis is put in the alternative:

Either,

  1. (1)
    the plaintiff made an agreement for lease which was breached (and therefore repudiated) by the plaintiff (by the facsimile forwarded by Mr Gear on the 24th March) and thereafter affirmed by the defendant (in particular by the facsimile sent by Mr Heiner on the 28th March 2000 and the further correspondence on the 3rd April 2000 and the 7th April 2000) but also by the payment of Mr Gear’s costs and outlays on the 10th April 2000 and the two rent payments made on the 13th April 2000 and 11th May 2000; and subsequently repudiated by the Defendant by the Notice to Landlord on the 30th May 2000, its abandonment of the premises on the 30th June 2000 and its refusal to be bound by the agreement;

or

  1. (2)
    The parties made an agreement in writing on or about the 28th March 2000 which agreement was later repudiated by the defendant.
  1. [14]
    The alternative basis is pleaded in paragraph 6 of the further amended statement of claim filed the 12th June 2001. During the trial, I gave leave to the plaintiff to amend the opening sentence of the particulars to paragraph 6 to read:

“The agreement is contained in some or all of the following documents.”

  1. [15]
    Mr Eliadis submits that in either event, his client is entitled to damages for breach of contract.
  1. [16]
    The defendant’s case is somewhat more subtle. Mr Gerritse did not give evidence for the defendant, rather the Chief Executive Officer of the Defendant Mr Wendt gave evidence on its behalf. As I have noted, there is no suggestion that Mr Gerritse was not authorised to act on behalf of the defendant, nor is it suggested that Mr Heiner was not authorised to do what he did. Given the nature of the correspondence, and the forceful advice of Mr Heiner in Exhibit 5, I must say I was surprised to hear from Mr Wendt (who signs all leases on behalf of the defendant) that he would never sign a lease containing a lock-out clause such as Clause 15.6 in the draft lease. I accept without reservation that he held such a position at the time; but it appears that his view was not known or not understood by Mr Gerritse. I hope I do justice to Mr Sweeny’s argument when I summarize it as follows:

Contrary to the position expressed by Mr Heiner in his letter to Mr Gear of the 1st June 2000, it is conceded that there was a concluded agreement between the parties, that is the agreement contained in Document 1 in Exhibit 1. He submits that this agreement was repudiated by the plaintiff by the Notice to Quit forwarded the 24th March 2000, thus justifying the defendant’s subsequent refusal to perform the agreement. In his written submission, he argues that the plaintiff, having not specifically pleaded affirmation election or waiver, is not permitted at trial to rely on such contentions (see paragraphs 15-18 of Mr Sweeny’s written submission), however at trial he accepted that the position taken at trial as expressed by Mr Eliadis as to his client’s alternative positions, did not take him by surprise, and indeed he did not seek any adjournment of the trial. He did not pursue the pleading point at trial.

  1. [17]
    In relation to affirmation election and waiver, he makes a number of submissions. Firstly he contends that as Mr Heiner and Mr Wendt did not think, until recently, that there was a concluded agreement to lease, the defendant was ignorant of its right to rescind the agreement to lease and unaware that it had been put to an election. There can be no doubt that as a general principle of contract law, before there can be a valid election to affirm a contract, there must be full knowledge of the material facts giving rise to the right to rescind: Elders Trustee Co v. Commonwealth Homes and Investment Co. Ltd. [1942] 65 CLR 603 at 615-617 and 618; Khoury v. GIO NSW [1983-84] 165 CLR 622 and 633. I cannot see that a mistaken belief as to the legal effect of the agreement, in the circumstances here, can amount to a material fact for the purposes of an election to affirm. Mr Heiner had knowledge of all the necessary material facts, as indeed did the defendant as a result of Mr Heiner’s advice to Mr Gerritse on the 27th March 2000. As to the situation, as here, where a party so arranges matters that his Solicitor carries out commercial negotiations and agreements on its behalf see the comments of Stephen J in Sargent v. A.S.L. Developments Ltd. [1974] 131 CLR 634 at 649.
  1. [18]
    Alternatively, Mr Sweeny submits that if I find there was an affirmation of the agreement by the letter of the 28th March 2000 and subsequent correspondence, such affirmation was not a “once and for all position”. He argues that I will be satisfied that the plaintiff’s position was that it required the lease to be in the terms set out in draft, and as modified by Mr Gear’s letter of the 15th March and accepted by Mr Heiner on the 28th March; which at all times included clause 15.6. There is no doubt that Mr Gear insisted on the inclusion of clause 15.6. This aspect of the argument of Mr Sweeny calls in aid some observations of Foster J in Chester v. Buckingham Travel Ltd [1981] 1 W.L.R. 96 at 100-101. The agreement (clause 20) contemplated that the parties would enter into a lease agreement, although it does not contain the “fateful words “subject to contract” or any other similar formula”: per the Court of Appeal in Lend Lease Financial Planning Limited v. Southcap Pty. Ltd. [1997] QCA 8999. Mr Sweeny submits that clauses such as clause 15.6 could not be described in any sense as “usual covenants”. Clearly, the facts of Chester are distinguishable, however accepting, as I do, that “lock-out” clauses such as clause 15.6 are not “usual covenants” in lease agreements involving building unit premises, I don’t think there is any comfort for the defendant given what occurred between the 24th March 2000 and the 28th March 2000. The agreement does not define the “usual covenants” to be inserted in the lease agreement. I accept for this argument the meaning of “usual” preferred by Foster J in Chester as being “occurring in ordinary use”. In my view, whether or not such clauses were in regular use on the Sunshine Coast in respect of building unit plan leases is simply irrelevant in the circumstances here. This unusual clause was specifically highlighted in earlier correspondence between the Solicitors, was certainly discussed by the Solicitors on the 24th March, and was the subject of express advice to the defendant from Mr Heiner in his memorandum of the 27th March. The letter of the 28th March constitutes an unequivocal acceptance by the defendant of a lease which included clause 15.6. It follows that an essential building block in Mr Sweeny’s argument on this point is removed, and there was no basis to regard Mr Gear’s insistence on clause 15.6 as some form of continuing repudiation giving the defendant a fresh election to terminate.
  1. [19]
    It is accepted by both parties that the task of determining whether or not the parties had an intention to create a legally binding contract is to be undertaken objectively. Again, it is accepted as a matter of law that in undertaking this assessment, the Court can nevertheless have regard to what the parties said and did as well as by what they wrote: Air Great Lakes v. KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 (CA) per McHugh JA at 337 C5, and see also the judgment of Mahoney JA at 333 6-334C. It is clear from clause 20 of the agreement that the parties had agreed that a formal agreement would thereafter be prepared. A contract is complete as soon as it is established that those who draw up the formal agreement have not the power to vary the terms already settled. If those terms include the essentials of a contract to lease, a concluded contract has come into existence: South Coast Oils Pty Ltd v. Look Enterprises Pty Ltd [1988] 1 Qd.R. 680 at 699 per Connolly J with whom other members of the Court agreed citing Lord Blackburn in Rossiter v. Miller (1878) 3 A.C. 1124, 1151. There is no doubt in my mind that the terms do include the essentials of an agreement to lease. Mr Eliadis submits that the agreement falls into what is sometimes referred to as the fourth category of Masters v. Cameron (1954) 91 CLR 353 at 360-362: see for example Young J in Drinkwater v. Caddyrack Pty Ltd (1997) unreported judgment of the Supreme Court of New South Wales, Matter No. 3970196 at p 9, where His Honour correctly cites as authority for a fourth class, Sinclair, Scott & Co v. Naughton (1929) 43 CLR 310 (per Knox CJ, Rich and Dixon JJ) at 317:

“One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing by consent, additional terms.”

  1. [20]
    Although Masters v. Cameron contains only three classes, it is quite clear that the fourth class has been applied in subsequent authority: for example see Baulkham Hills Private Hospital Pty Ltd v. GR Securities Pty Ltd (1986) 40 NSWLR 622, 628.
  1. [21]
    I accept his submission. It seems to me that the actions of the parties fall squarely within this category, and it follows that there was a concluded agreement which was repudiated by the plaintiff, affirmed by the defendant, i.e. the defendant did not accept the plaintiff’s repudiation of the agreement, and subsequently repudiated by the defendant. If I am wrong in this conclusion; for example because the consent of the parties to the “additional terms” was not secured until after the plaintiff’s repudiation on the 24th March 2000, I am satisfied, that having regard to all the acts both oral and in writing of the parties, a subsequent agreement to lease was made on the 28th March 2000, and varied by consent and concluded by Mr Gear’s letter of the 7th April 2000, and that such agreement falls into either one of the first two classes of contract described in Masters v. Cameron (at p 360), and that this agreement was repudiated by the defendant’s conduct in refusing to be bound by the terms of the agreement and vacating on the 30th June 2000.

Quantum

  1. [22]
    Damages are agreed at $32,300.00. I calculate interest on that sum in accordance with Mr Eliadis’s submissions at $4,462.50.

Judgment

  1. [23]
    I give judgment for the plaintiff for $36,762.50.

Costs

  1. [24]
    It is common ground that on the 11th July 2002 the plaintiff offered to settle the claim for $30,000.00 together with costs, which offer was rejected by the defendant. Clearly the judgment is “no less favourable than the offer to settle”, and there being no suggestion that the plaintiff was not at all material times willing to settle in accordance with the offer, the plaintiff is entitled to its costs of the claim on the indemnity basis and I so order: r. 360(1) UCPR.
Close

Editorial Notes

  • Published Case Name:

    Gear Nominees Pty. Ltd. v Community Agency for Development, Employment and Training Inc.

  • Shortened Case Name:

    Gear Nominees Pty. Ltd. v Community Agency for Development, Employment and Training Inc.

  • MNC:

    [2002] QDC 259

  • Court:

    QDC

  • Judge(s):

    Robertson DCJ

  • Date:

    14 Oct 2002

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
2 citations
Jump To
Cite 1 - (1985) 2 NSWLR 309
Cite 2 - (1985) 2 NSWLR 309
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
2 citations
Jump To
Cite 1 - (1986) 40 NSWLR 622
Cite 2 - (1986) 40 NSWLR 622
Builder's Trustee and Executor Co Ltd. v Commonwealth Homes and Investment Co Ltd. (1942) 65 CLR 603
2 citations
Jump To
Cite 1 - (1942) 65 CLR 603
Cite 2 - (1942) 65 CLR 603
Chester v Buckingham Travel Ltd [1981] 1 WLR 96
2 citations
Jump To
Cite 1 - [1981] 1 WLR 96
Cite 2 - [1981] 1 WLR 96
Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622
2 citations
Jump To
Cite 1 - (1984) 165 CLR 622
Cite 2 - (1984) 165 CLR 622
Lend Lease Financial Planning Limited v Southcap Pty. Ltd. [1998] QCA 117
2 citations
Jump To
Cite 1 - [1998] QCA 117
Cite 2 - [1998] QCA 117
Masters v Cameron (1954) 91 C.L.R 353
3 citations
Jump To
Cite 1 - (1954) 91 C.L.R 353
Cite 2 - (1954) 91 C.L.R 353
Cite 3 - (1954) 91 C.L.R 353
Rossiter v Miller (1878) 3 AC 1124
2 citations
Jump To
Cite 1 - (1878) 3 AC 1124
Cite 2 - (1878) 3 AC 1124
Sargent v ASL Developments Pty Ltd (1974) 131 C.L.R., 634
2 citations
Jump To
Cite 1 - (1974) 131 C.L.R., 634
Cite 2 - (1974) 131 C.L.R., 634
Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310
2 citations
Jump To
Cite 1 - (1929) 43 CLR 310
Cite 2 - (1929) 43 CLR 310
South Coast Oils (Qld & NSW) Pty Ltd v Look Enterprises Pty Ltd[1988] 1 Qd R 680; [1986] QSC 443
2 citations
Jump To
Cite 1 - [1988] 1 Qd R 680
Cite 2 - [1988] 1 Qd R 680
South Coast Oils Pty. Ltd. v Look Enterprises Pty. Ltd.[1988] 1 Qd R 680; [1987] QSCFC 90
2 citations
Jump To
Cite 1 - [1988] 1 Qd R 680
Cite 2 - [1988] 1 Qd R 680

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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