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  4. Ultra Tune Properties (Qld) No 2 Pty Ltd v DNR1 Pty Ltd - [2021] QSC 215

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Ultra Tune Properties (Qld) No 2 Pty Ltd v DNR1 Pty Ltd[2021] QSC 215

Ultra Tune Properties (Qld) No 2 Pty Ltd v DNR1 Pty Ltd[2021] QSC 215

SUPREME COURT OF QUEENSLAND

CITATION:

Ultra Tune Properties (Qld) No 2 Pty Ltd & Anor v DNR1 Pty Ltd [2021] QSC 215

PARTIES:

ULTRA TUNE PROPERTIES (QLD) NO 2 PTY LTD

ACN 093 558 715

(first plaintiff)

AND

AUSTRALIAN MECHANICAL REPAIRS PTY LTD
ACN 601 544 414

(second plaintiff)

v

DNR1 PTY LTD AS TRUSTEE FOR THE DALTON FAMILY TRUST

(defendant)

FILE NO/S:

BS 12828 of 2020

DIVISION:

Trial Division

PROCEEDING:

Civil

DELIVERED ON:

30 August 2021

DELIVERED AT:

Brisbane

HEARING DATE:

2 and 3 August 2021

JUDGE:

Bradley J

ORDER:

  1. Judgment for the defendant on the plaintiffs’ claim.
  2. The plaintiffs pay the defendant’s costs of the proceeding.

CATCHWORDS:

LANDLORD AND TENANT – AGREEMENTS FOR LEASE – CREATION – WHETHER TERMS STILL UNDER NEGOTIATION – where an expired lease continued as a monthly tenancy under a “holding over” clause – where the parties entered negotiations for the creation of a new lease – where the negotiations were protracted and exhaustive – where the landlord provided a draft lease in the course of negotiations – where the draft lease was accompanied by an express qualification that the landlord did not intend to enter a legally binding agreement until negotiations had concluded and a lease had been signed – where the tenant informed the landlord the lease had been “effectively signed” – whether the terms of the lease agreement were still under negotiation – whether the parties held a common intention to be bound by the agreement

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – MATTERS NOT GIVING RISE TO BINDING CONTRACT – STATEMENTS OF INTENTION, NEGOTIATIONS AND INVITATIONS TO TREAT – where the plaintiffs (the tenant and the tenant’s licensee) contend the provision of the draft lease was an offer by the landlord to enter into a legally binding agreement – where the tenant signed the draft lease and returned it to the landlord by express post – where the landlord received the signed lease in the mail and retained it for some days without comment – whether the posting of the signed lease was an acceptance of an offer made by the landlord or otherwise gave rise to a binding agreement

ESTOPPEL – ESTOPPEL BY CONDUCT – PROMISSORY ESTOPPEL – where the plaintiffs contend that each of them assumed or expected there was an enforceable agreement to lease between the landlord and the tenant – where the plaintiffs contend the landlord knew the tenant was relying on that assumption and failed to correct the misapprehension of the legal position between the parties – where the tenant’s licensee had not yet agreed to the draft lease – where negotiations over rent relief were ongoing between the landlord and the tenant – where a contract of sale with an incoming licensee was conditional on a lease being in place – whether the plaintiffs assumed or expected a binding agreement to lease was in existence – whether the defendant acted unconscionably

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – MISLEADING OR DECEPTIVE CONDUCT GENERALLY – MISLEADING OR DECEPTIVE: WHAT CONSTITUTES – whether the landlord’s silence about an alleged “change of heart” on granting a new lease was conduct likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law

Competition and Consumer Act 2010 (Cth) sch 2 (Australian Consumer Law), s 18, s 236

Land Title Act 1994 (Qld), s 11(1)(b), s 31, s 37, s 38, s 66, s 161(3A)

ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, followed

Ermogenous v Greek Orthodox Community (2002) 209 CLR 95, cited

Masters v Cameron (1954) 91 CLR 353, cited

Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, followed

Santa Fe Land Co Ltd v Forestal Land Timber and Railways Co Ltd (1910) 26 TLR 534, cited

COUNSEL:

JAS Ford for the plaintiffs

CJ Ryall for the defendant 

SOLICITORS:

Hone Legal & Conveyancing for the plaintiffs

John Seccull Law for the defendant

  1. [1]
    The parties are in dispute about whether two of them reached a binding and enforceable agreement to lease, and, if so, whether the agreement should be specifically performed.  If they did not agree, the dispute includes whether one party is estopped from denying an agreement was reached.  There is also a claim for relief under the Australian Consumer Law. 

The events before October 2019

  1. [2]
    The first plaintiff Ultra Tune Properties (Qld) No 2 Pty Ltd (the Tenant) is a subsidiary of Ultra Tune Australia Pty Ltd (UTA).  UTA conducts a business as franchisor of a system for operation of service centres for the electronic tuning, servicing, repair and maintenance of motor vehicles and the retail sale of motor vehicle replacement parts, known by the trade name “Ultra Tune”.  UTA, the Tenant and other subsidiaries operate as a group of companies.  The Tenant was described as one of the subsidiary property companies in the group.  Its role within the group seems to be to lease areas suitable for an Ultra Tune franchise business and to license an Ultra Tune franchisee to occupy them.  Peter Sean Buckley is the sole director of UTA and of the Tenant.  Albert Wee Tai Chong is company secretary of each.  UTA is not a party to this proceeding. 
  2. [3]
    On 21 August 2006, the Tenant accepted a lease of an area of 234.7 m2 (the premises) on the ground floor of a commercial building on land at the corner of Spencer Road and Jay Gee Court, Nerang.  The lessor was a former trustee of the Dalton Family Trust (the Trust).  The land is close to the Pacific Motorway and the premises have good exposure to passing traffic. 
  3. [4]
    The lease was for a little over five years from 11 September 2006 to 30 September 2011, with two five-year options to renew.  It was in writing, 96 pages in length, and in a form capable of registration under the Land Title Act 1994 (Qld) (LTA).  Both the former trustee and the Tenant executed the lease as a deed.  The former trustee affixed its common seal with the signatures of two directors.  Although the Tenant’s acceptance of the lease could have been executed by an authorised legal practitioner,[1] the Tenant executed the lease by its director Mr Buckley and company secretary Mr Chong.
  4. [5]
    On 2 October 2006, the lease was registered over the title to the land.  On registration, the lease became part of the freehold land register,[2] and the particulars of Tenant’s interest as lessee of the premises became a registered interest in the land.[3]
  5. [6]
    No evidence was adduced about the first eight or so years of the lease.  It may be assumed: UTA entered into a franchise agreement with a franchisee; the Tenant granted that franchisee a licence to occupy the premises; and the franchisee conducted an Ultra Tune business on the premises.[4] 
  6. [7]
    Sometime before 31 August 2011, the Tenant exercised the first option to renew the lease and so the lease continued for a further fixed term of five years from 1 October 2011 to 30 September 2016.
  7. [8]
    In about June 2015, the second plaintiff Australian Mechanical Repairs Pty Ltd (the Licensee) entered into a franchise agreement with UTA, enabling it to conduct an Ultra Tune business from the premises.  From about that time, the Tenant licensed the Licensee to occupy the premises.  The principals of the Licensee were Keldj “Kel” Schilling and Karen Schilling, each of them holding one share in the Licensee.[5]  The Licensee came to occupy the premises more than a year before the term of the lease, as extended by exercise of the first option, was due to end.  
  8. [9]
    The Tenant did not exercise the second option to renew the lease of the premises during the exercise period, which ended on 31 August 2016. 
  9. [10]
    On 30 September 2016, the lease expired.   
  10. [11]
    From 1 October 2016, the Tenant remained in occupation of the premises with the consent of the former trustee.  The lease continued as a monthly tenancy, under a “holding over” clause.  The Tenant could terminate the tenancy on one month’s written notice, as could the landlord. 
  11. [12]
    In about April or May 2018, the defendant DNR1 Pty Ltd (the Landlord) became trustee of the Trust and the registered proprietor of the fee simple in the land.  Rodney Dalton is the sole director of the Landlord.  He is a solicitor with a practicing certificate.  Mr Dalton’s professional work is residential conveyancing.  He lives in Cairns.  He was one of three directors of the former trustee.
  12. [13]
    No other step of any present consequence was taken between October 2016 and October 2019.

The events between October 2019 and 1 October 2020

  1. [14]
    Joel Willing is the Qld State Manager of UTA, based in South East Queensland.  His direct manager is George de Bondt, the National Operations Manager of UTA.  Yenny Luu is a paralegal in UTA’s Legal Department.  She is not a lawyer, although she has studied some business law.  Ms Luu answers to Mr Chong, a legal practitioner and the UTA company secretary.  On some occasions she also answers to Mr de Bondt.  In her role, Ms Luu usually does “new lease negotiations” and “preparation of franchise documents and agreements”.
  2. [15]
    In late October 2019, Ms Luu had a telephone conversation with Mr Willing.  She told him the Tenant had not exercised the option to renew the lease for the premises.   The two agreed that Mr Willing would “reach out” to the Landlord and “see if we could establish a new lease.”  As Mr Willing explained to the court, the failure to exercise the second option and the continuation of the lease on a month-to-month basis affected the licence the Tenant was able to grant to the Licensee.  It effectively took away substantial value that might otherwise be associated with the Licensee’s business.
  3. [16]
    On or around 30 October 2019, Mr Willing spoke with Mr Dalton by telephone.  This was the first time he could recall speaking with Mr Dalton.  Mr Willing asked if Mr Dalton was interested in negotiating a new lease for the premises.  Mr Dalton said he was.  Mr Willing was about to travel to Thailand for a few weeks, so he and Mr Dalton agreed they would “touch base” after Mr Willing returned. 
  4. [17]
    On 4 November 2019, at 11:02 am, Ms Luu sent an email to Mr Dalton with a copy to Mr Willing.  In it, she wrote:

“I have had a conversation with Joel [Willing] and I believe you have come to an agreement in terms of the lease.

…

As you may or may not know our franchisee’s health is deteriorating and they are looking to sell the business.

We will also give you the details of the new franchisee once this has been confirmed.

Can you please confirm that you are willing to extend the lease for 5 years?”

  1. [18]
    About 25 minutes later, Mr Dalton replied, promptly, if curtly:

“You are misinformed.

There is no agreement.

Joel and I agreed to speak again mid December when he returns to work.”

  1. [19]
    By this time, the Tenant had occupied the premises on a monthly tenancy for a little over three years.  The second option to extend the lease for a further five years had expired more than three years earlier. 
  2. [20]
    On 6 February 2020, Mr Willing sent Mr Dalton an email, copied to Ms Luu.  He referred to a telephone conversation that day and “as discussed” asked Mr Dalton to send a “draft lease” to him and Ms Luu “for review.”  I infer there was a telephone conversation that day in which Mr Dalton told Mr Willing that he had been preparing a draft lease. 

February letter

  1. [21]
    On 14 February 2020, Mr Dalton sent a letter (the February letter) to Mr Willing, Ms Luu and Sam Xiao, another UTA employee.[6]  In it and its attachments, Mr Dalton dealt with six “lease negotiation issues”, a schedule of outstanding rent, a reconciliation of outgoings, and “a DRAFT Lease” of 65 pages. 
  2. [22]
    Mr Dalton began the February letter in this way:
  1. “1.
    DNR1 Pty Ltd is the trustee for the Dalton Family trust which owns the property in which unit 2/86 Spencer Rd is located and this unit is leased by Ultra Tune.

We enclose a draft lease for UltraTune’s consideration.

This draft lease is in a different format [than] the previous lease document so please ensure this document is reviewed thoroughly.

Legal Status during negotiations

  1. 2.
    DNR1 Pty Ltd does not intend to be bound into a lease agreement by the submission of this draft document.  DNR1 intends to use the document as a basis for proceeding with lease negotiations.  DNR1 is not bound by a lease agreement until such time:
  1. (1)
    as DNR1 signs a lease document which contains terms suitable to DNR1; and
  1. (2)
    all other matters which DNR1 may bring up from time to time in negotiations are declared as concluded.”
  1. [23]
    The draft lease was for a term of five years commencing on 1 February 2020 and ending on 31 January 2025.  It included an option to renew the lease for a further five-year term from 1 February 2025 to 31 January 2030.  It was in a form capable of registration under the LTA. 
  2. [24]
    In the draft lease, the form 7 was drawn for the Landlord to execute by its sole director and for the Tenant to accept by the signatures of two directors.[7]  Both the creation of the lease and its acceptance were to be witnessed by a person qualified in accordance with the LTA.  Unlike the earlier registered lease, the draft lease did not provide for either party to execute the attached form 20 schedule. 
  3. [25]
    In the February letter, after dealing with “Legal Status during negotiations” (see [22] above), Mr Dalton raised the following six lease negotiation issues:
    1. (a)
      Clarification of the status of a storage container.  It appears the container belonged to the Licensee and was not on the leased premises, but elsewhere on the land where a statutory easement existed.  The Landlord wished it to be clear to any “incoming assignee” of the Licensee that there was no “security of lease tenure” for the container. The Landlord considered the Licensee to have only a licence for the placement of the container on the land that was revokable by the Landlord at any time.
    2. (b)
      Underpayments of rent.  Mr Dalton enclosed a summary of rent paid between 1 July 2017 and 5 December 2019.  It showed outstanding rental of $1,997.53.  The Landlord required this to be rectified by the Tenant “prior to commencement of any new lease.”
    3. (c)
      Maintenance of the premises in a clean condition.  The premises were to be cleaned by “a commercial clean” and the Landlord was to be given the relevant trade invoice for that work “prior to any finalization of lease negotiations.”
    4. (d)
      Retouching areas of the workshop floor.  Areas of the workshop floor were said to need retouching with the usual floor coating.
    5. (e)
      Outgoings reconciliation. Mr Dalton enclosed an adjustment note issued by the Landlord, schedules calculating the adjustment amount and copies of rate notices for the land.  The adjustment notice showed the Tenant had a credit of $95.77 for outgoings for the 2018-19 financial year.
    6. (f)
      Mortgagee’s consent.  The Landlord noted the mortgagee’s consent would be required for a new lease.[8]
  4. [26]
    Mr Dalton ended the February letter by advising, “We await UltraTune’s feedback on the draft lease.”
  1. [27]
    On 31 March 2020, Mr Willing sent an email to Mr Dalton, copied to Ms Luu.  Its subject was “Ultra Tune Nerang Rent Relief”.  In it, Mr Willing requested:

“that 3 months of rent be waived for this store and half rental be paid for an additional 3 months afterwards as this is all our franchisee can currently afford.”

  1. [28]
    On 15 and 21 April and again on 6 May 2020, Mr Willing followed up with Mr Dalton, seeking a response to his 31 March request for rent relief.  On 5 May 2020, Ms Schilling of the Licensee sent Mr Dalton an email asking him to contact her directly about rent relief.
  2. [29]
    On 6 May 2020, Mr Dalton replied to Mr Willing by email, enclosing a letter to the Tenant.  In it, amongst other things, Mr Dalton explained that he knew of no Queensland regulation “mandatorily applying” to the lease, and that the Tenant had not submitted the proof required to satisfy the Federal Mandatory Code of Conduct.  Mr Dalton pointed out that the Tenant occupied the premises on a month-to-month tenancy, had not responded to the draft lease sent on 14 February 2020, and rental was outstanding when the draft lease was sent.  He explained:

“The landlord’s view is that a request for deferral of rent is not reasonable given the lease is a monthly periodic lease.  There is no timeframe available for the amortization of deferred rent because it is a periodic monthly tenancy, and so there is no basis for assuming deferred rental payments will be made in future over a period [of] time given the periodic lease can be terminated at any time.

There is no financial return prospects to the landlord in subsidizing a tenant by which it may be implied has no viable future by reason that it will not enter into a fixed term lease.

Non-Mandatory negotiations for Rent Relief

In the event that the tenant cannot prove that the Mandatory Code applies then the landlord advises that the tenant should:

  1. provide information as to revenue decline not only at the Nerang store level but also the UT retail group level;
  1. negotiate on a month by month basis given the COVID-19 situation can change rapidly; and
  1. continue engagement on the draft lease;
  1. give proof that UT has waived or deferred its right to franchise fees commensurate with the rent waiver that it requests.”

May email

  1. [30]
    On 25 May 2020, Ms Luu responded to the February letter by email (the May email) to Mr Dalton, copied to Mr Willing.  In it, Ms Luu noted Mr Dalton’s 6 May 2020 email about rent relief and advised she would address it by “another email.” 
  2. [31]
    Ms Luu then provided “our response” to the six lease negotiation issues raised by Mr Dalton in the February letter.  Ms Luu described them as “ancillary items”.[9]  Her responses are extracted and summarised below:
    1. (a)
      Storage container: “We will agree to [the Landlord] having the right to remove the container at any time given 30 days notice is given for us to arrange the removal.”
    2. (b)
      Underpayment of rent: “We will pay this, please send us an invoice to that effect.”
    3. (c)
      On cleaning: “We will engage a professional cleaner to do this.”
    4. (d)
      On the workshop floor: “We will re-touch the floor”.
    5. (e)
      On outgoings: “apply this to the next reconciliation of outgoings.”
    6. (f)
      On the mortgagee: “We consent to obtaining the mortgagee’s consent.” 
  3. [32]
    Ms Luu then proceeded to set out 44 queries about, or proposed changes to, the terms of the draft lease.  These related to four Items, 35 clauses and one paragraph in the appendix to the draft lease.
  4. [33]
    To this point, Mr Dalton had been dealing with Mr Willing and Ms Luu about the proposed new lease, and not with the Licensee.  On 6 July 2020, Mr Schilling of the Licensee sent a text message to Mr Dalton advising:

“Ultratune have told us we cannot sell as a private business so we cannot take on the lease ourselves.  We have a few interested parties to buy it as an Ultratune so we are hoping one of them is approved by Ultratune shortly.”

  1. [34]
    Mr Dalton replied, thanking Mr Schilling, and expressing the sentiment, “I hope you manage to get the sale across the line [with] UT.”
  1. [35]
    On 30 July 2020, Ms Luu sent an email to Mr Dalton, asking “How are you going with the changes?” and advising, “Should you have any questions please do not hesitate to contact me.” 

19 August letter

  1. [36]
    On 19 August 2020, Mr Dalton responded to Ms Luu’s 30 July follow up, and provided a substantive reply to Ms Luu’s May email.  He did so by an email, also copied to Mr Willing, attaching a letter of response (the 19 August letter) and an updated draft lease.  The covering email explained that the updated draft lease incorporated “the changes made to reflect the response”. 
  2. [37]
    In the 19 August letter, Mr Dalton began by restating something of the text from the February letter:

“DNR1 Pty Ltd does not intend to be bound into a lease agreement until such time as DNRQ [sic] signs a lease document which contains terms suitable to DNR1 and all other matters which DNR1 may bring up from time to time in negotiations are declared as concluded.  This letter is an attempt to further negotiate.”

  1. [38]
    As to the six “lease negotiation” or “ancillary” matters: Mr Dalton advised a different view about the storage container;[10] he advised the Landlord would send the invoice(s) for underpaid rent; he observed the Landlord may already have credited the outgoings amount; and he noted Ms Luu’s responses on the other three matters: cleaning, workshop floor[11] and mortgagee’s consent.
  2. [39]
    Mr Dalton then turned to Ms Luu’s 44 queries and changes to the draft lease.  He advised that 14 were “Agreed”.  He advised 22 were “Not Agreed”.  He provided a more detailed response or suggested changes to the balance, otherwise proposing about 12 amendments to the updated draft lease to address queries or amendments Ms Luu had proposed. 
  3. [40]
    He concluded the 19 August letter, “We await Ultra Tune’s response to these counterpoints.”  

27 August email

  1. [41]
    On 27 August 2020, Ms Luu sent an email in response to the 19 August letter, which she copied to Mr Willing.[12]  In this communication (the 27 August email), Ms Luu advised:

“We have reviewed your comments and have the following response (We will only mention the items we wish to clarify/change for ease of communication)”. 

  1. [42]
    Ms Luu then dealt with seven provisions in the updated draft lease: payment of building insurance; whether the floor required diamond grinding; the maximum weight for machinery attached to the floor; consent to license the premises; termination in the event of damage or destruction of the premises; provision of a bank guarantee; and noise levels.  Most of these were the subject of questions seeking clarification or modification.  Only one (termination by the Tenant if the premises are damaged) was described as, “Not Agreed.” 
  2. [43]
    Ms Luu’s 27 August email continued in this way:

“We are pleased that we can continue to negotiate a new lease with you and thank you for the opportunity. 

As such we were considering if as a good will gesture you would consider the opportunity for our franchisee to obtain some rent relief in these trying times?

…

Please consider our commitment to this lease as our assurance to you that we are dedicated to this premise and wish to continue a prosperous future for all parties.

Please consider helping us and our franchisee through this difficult time with some rent relief.”

  1. [44]
    As the dates of the two communications indicate, this was a remarkably prompt response on the part of Ms Luu to the 19 August letter.  Prior to this time, the pace of communications had not been brisk.  However, if considered as a response to Mr Dalton’s 6 May email on rent relief, it was in line with the usual leisurely exchanges between those parties.  
  2. [45]
    Mr Willing said it was “highly probable” he spoke to Ms Luu and Ms Schilling after receiving a copy of Ms Luu’s 27 August email.  He made a file note, dated the same day at 3:00pm, recording Ms Luu telling Ms Schilling:

“we are just fine tuning the details at the moment to get the best deal and when we have a finalized lease we will shoot it across to [Ms Schilling] for her final confirmation.” 

  1. [46]
    On 2 September 2020, Ms Luu followed up, seeking a response from Mr Dalton to the 27 August email, asking if he “had any thought to the last amendments below.”

September letter

  1. [47]
    On 10 September 2020, Mr Dalton replied by email to Ms Luu.  He enclosed a letter (the September letter).  He explained that it was a response “to your firm’s email below which requested changes to the draft lease under consideration.” 
  2. [48]
    Mr Dalton explained the Landlord’s position.  He answered the first, second and seventh issues, which were queries about the payment of building insurance, whether diamond grinding of the floor was necessary, and whether the Landlord already held a bank guarantee.  He enclosed documents and photographs in support of his explanations.  He did not accept Ms Luu’s contentions.  For the third issue – the maximum weight for machinery attached to the floor – he left open including a specified maximum weight on engineering advice.  For the fourth, fifth and seventh issues – consent to license the premises; termination in the event of damage or destruction of the premises; and noise levels – Mr Dalton expressed views that the existing provisions of the updated draft lease did not require amendment. 
  3. [49]
    On the last of Ms Luu’s issues, the request for rent relief, Mr Dalton advised, “The Landlord is still considering this request.”   
  1. [50]
    On 9 September 2020, the principals of the Licensee had sent an email to Mr Dalton asking for “a copy of the lease please for Ultra Tune Nerang”.  They explained:

“We have 3 parties wanting a copy of the lease & this is making negotiations very hard as we need to produce a lease by tomorrow.  Please if we can get a copy this would be appreciated.”

  1. [51]
    On 10 September 2020, Mr Dalton replied, advising the Licensee:

“Today, the Landlord has sent correspondence to Ultra Tune responding to its latest request for changes to the draft lease.  We hope the lease negotiations won’t take much longer but until there is an executed lease there is no lease document that we can show your interested parties.”

1 October email

  1. [52]
    On 1 October 2020, Ms Luu replied to Mr Dalton’s September letter by an email (the 1 October email), which she copied to Mr Willing.  Owing to its importance, it is appropriate to set out the 1 October email in full:

“Hi Rod

Apologises [sic] for the delayed response.

The franchisee and us are happy with the current amendments and your explanation of the requested amendments below.

Our director has effectively signed the lease however we wanted to approach the issue of rent relief with you once again as it does essentially tie into the various issues you addressed in your first email e.g. the back rent owed to you for previous years.

We are seeking a complete waiver for the April 2020 rent due to covid.

As you would know in QLD the Covid Emergency Response Act specifically mentions franchisees as able to obtain rent relief.

Can you please see if this is acceptable?”

The primary contract case

  1. [53]
    The plaintiffs contend that, by the time of Ms Luu’s 1 October email, there was a binding and enforceable agreement between the Tenant and the Landlord.  It is said to be an agreement to lease the premises to the Tenant on the terms in the updated draft lease submitted by the Landlord with the 19 August letter.  To use a familiar categorisation, they submit it was an agreement in the second class considered in Masters v Cameron,[13] where:

“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.”[14]

  1. [54]
    It is common ground that a determination of whether parties intended to create binding contractual arrangements requires an objective assessment of the state of affairs between the parties.[15]  In ABC v XIVth Commonwealth Games Ltd, Gleeson CJ described the question in this way:

“It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360).  That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract.  To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain.  Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.

Reference has earlier been made to ‘intention’.  Cases which typically give rise to problems of the kind presently under consideration are cases in which there is no doubt that the parties had a common intention that at some stage, and by some means, they would enter into contractual relations.  They have entered into negotiations for that specific purpose.  The problem which arises is that they have exchanged communications which, on the one hand, use the language of agreement but, on the other hand, disclose an expectation that at some future time a document embodying the terms of their contractual arrangement will be brought into existence.  Where, as in the present case, the communications which the parties have exchanged are in writing, the question of their ‘intention’ is, prima facie, to be resolved objectively, and as a matter of construction of the relevant documents.”[16]

  1. [55]
    For the plaintiffs, Mr Ford proposed the test as formulated by Campbell JA in Ryledar Pty Ltd v Euphoric Pty Ltd,[17] a rectification case:

“For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the ‘objective intention’ of the parties.  That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties have of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract”[18]

  1. [56]
    Mr Ford also drew the court’s attention to the High Court’s decision in Ermogenous v Greek Orthodox Community.[19]  Concerning a very different subject matter, it succinctly describes the search for a relevant intention.  An assessment of the parties’ objective intention “may take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances.”  Further:

“Although the word ‘intention’ is used in this context, it is used in the same sense as it is used in other contractual contexts.  It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened.  It is not a search for the uncommunicated subjective motives or intentions of the parties.”[20]

  1. [57]
    There is no dispute about the subject matter of the alleged agreement to lease.  It would have created a new fixed term lease of the premises in place of the existing monthly tenancy.  The comprehensive draft lease and updated draft lease prepared by Mr Dalton remove otherwise common issues of identifying material or essential terms of an alleged agreement.  There were not “numerous and significant areas” in which the parties had failed to reach agreement. 
  2. [58]
    The status of the two parties is also common ground.  The Landlord was the owner of commercial premises, including the premises the subject of the monthly tenancy, as trustee of the Trust.  It was earning rental income on the Trust assets for the Trust’s beneficiaries.  The Tenant was a member of a group of companies operating a commercial enterprise.  It was holding over in the premises on the monthly tenancy.  The Tenant had licensed the Licensee to occupy the premises for the purpose of operating as an Ultra Tune franchisee.   
  3. [59]
    The negotiations were framed by the lack of security of tenure for the Tenant (and so the Licensee), the Landlord’s uncertainty of the conditions on which the Tenant would remain, and the significant loss of value suffered by the Licensee, because of the Tenant’s failure to renew the lease for a second fixed term.  From November 2019 onwards, the negotiations were also informed by the personal circumstances of Ms Schilling and the search for a purchaser of the Licensee’s franchise business.  Although these matters might have justified a more intensive and abbreviated negotiation, that did not occur.  By 1 October 2020, the monthly tenancy and the relationship of landlord and tenant had been in place for four years.[21]  The pace of the negotiations does not indicate any urgency on the part of the Landlord or the Tenant in seeking to reach a binding conclusion.[22]  The Licensee, on the other hand, urged progress from the sideline, but without apparent effect. 
  1. [60]
    The words and actions communicated by the Landlord and the Tenant to each other are summarised or set out above.[23]  These were sequential communications.  Each was a response by one party to the other’s last communication. 
  1. [61]
    A reasonable person in the position of the Tenant would have understood the words Mr Dalton included in the 19 August letter as an express qualification that his conduct in submitting the updated draft lease did not amount to an offer to enter into a legally binding agreement on the terms in the updated draft lease.  Objectively, there is no ambiguity in the statement that the Landlord “does not intend to be bound into a lease agreement until such time as [it] signs a lease document” and “all other matters which [the Landlord] may bring up from time to time in negotiations are declared as concluded.”  By these words, which Mr Ford called a “disclaimer”, Mr Dalton communicated an intention to ensure the negotiations could continue without the Landlord being bound by any document, proposal, or response.  By this communication, Mr Dalton created a notional space for negotiations, freed from the risk and pressure otherwise attendant upon a bare exchange of offers.  Mr Dalton had described the letter (and logically the enclosed updated draft lease it explained) as “an attempt to further negotiate.” 
  2. [62]
    This was the second time Mr Dalton had communicated such an intention on the part of the Landlord.  In the express qualification to the February letter, Mr Dalton stated that the Landlord “did not intend to be bound into a lease agreement by the submission of this draft document”. 
  3. [63]
    For the Tenant, Mr Ford submitted that the Landlord had waived or removed the express qualification in the 19 August letter by not repeating it in the September letter.
  4. [64]
    I have considered the September letter carefully.  In it, Mr Dalton did not indicate a “final” position on any of Ms Luu’s eight lease negotiating issues.  He responded to six in a way that anticipated a further response on the part of Ms Luu, to indicate whether Ms Luu wished to take any of those issues any further, in light of the answers he provided, the views he expressed and the option he left open in the letter.  On the issue of rent relief, Mr Dalton advised Ms Luu that the Landlord was still considering the request.  A further response on that topic was to be anticipated.  He did not state that any of the matters was concluded.  The only issue that appears to be concluded by the letter is that concerning the bank guarantee, because Ms Luu had raised only a factual enquiry and Mr Dalton had answered it.   
  5. [65]
    A reasonable person in the position of the Tenant would not have understood the September letter as either waiving the earlier express qualification or making a new offer to enter into a binding and enforceable agreement on the updated draft lease terms.  The express understanding in the 19 August letter remained: that the landlord would not be bound until it signed a lease document and the negotiation on all other matters were concluded.
  6. [66]
    There is a further problem with the plaintiffs’ primary contract claim.  A reasonable person in the position of the parties would not have understood Ms Luu’s 1 October email as an acceptance of an offer to enter into a binding agreement (had such an offer been made) or as a statement that the parties had thereby made such an agreement. 
  7. [67]
    For the plaintiffs, Mr Ford submitted that Ms Luu’s statement in the 1 October email that Mr Buckley “has effectively signed the lease” should be understood as communicating that Mr Buckley had in fact signed the lease or that he had signed it “with effect” or that he had done all necessary to make the lease become “effective”.  I am unable to accede to these submissions. 
  8. [68]
    In the context of the communications between Ms Luu and Mr Willing for the Tenant and Mr Dalton for the Landlord, Ms Luu’s expression that Mr Buckley had “effectively signed the lease” conveys that he had not actually done so, but had done something short of signing it.  This is how it would be understood by a reasonable person in the position of Mr Dalton.  Objectively considered, it does not convey an intention on the part of the Tenant that it has bound itself on those terms. 
  9. [69]
    The email bears the same reading even when considered in isolation from the earlier communications. 
  10. [70]
    Ms Luu qualified her statement about the lease being “effectively signed” with the immediately following clause commencing “however” and dealing with rent relief.  She stated the Tenant’s position, “We are seeking a complete waiver for the April 2020 rental due to covid.”  She asked Mr Dalton, “Can you please see if this is acceptable?”
  11. [71]
    I reject Mr Ford’s submission that the rent relief was an issue entirely separate to the lease negotiations. 
  12. [72]
    From the time the negotiations began, there were lease negotiation issues or ancillary matters related to the grant of a new lease.  These were as much the subject of negotiation as the terms and conditions in each written version of the draft lease.[24]  The written communications by which the parties negotiated show neither party intended that the ancillary matters would be the subject of terms or conditions in the form of the written lease.  Both parties intended that they would be concluded during the lease negotiations.  Mr Dalton made clear there would be no binding agreement to lease before each of these issues (and any other arising in the meantime) was concluded.  Ms Luu did not challenge that position.  Mr Dalton did not vary it.  One of the ancillary matters was rent relief.   It continued to be the subject of negotiation by means of the proposal for the waiver of one month’s rent put forward in the 1 October email. It was never concluded.  
  13. [73]
    Ms Luu did not have authority to bind the Tenant.  She did not purport to do so.  Only Mr Buckley had authority.  A reasonable person in the position of the negotiating parties would have understood that to be the case.  Ms Luu’s reference to the position of the “director” objectively conveys that acceptance or otherwise of the lease terms and conditions was a matter for Mr Buckley.   
  14. [74]
    In the relevant context, objectively considered, the 1 October email communicates that Mr Buckley is likely to sign a lease, on the updated draft lease terms, if the Landlord in the negotiations were to waive the rent for April 2020.  It is not an offer by the Tenant to contract on such a basis.  It is not an acceptance by the Tenant of an offer to that effect made by the Landlord.  It is an indication given by a negotiator, without clarity or authority.  In other words, it is merely another step in the lease negotiations.  The email is certainly not an expression that a binding agreement has been concluded. 
  1. [75]
    In a sequence of exchanges between negotiating parties, the search for the mutual intention to be bound is traditionally analysed in terms of offer and acceptance.  The plaintiffs abjure such an approach. 
  2. [76]
    Mr Ford urged that the court conclude that by 1 October 2020 the Tenant and the Landlord “had thoroughly considered the draft terms between them, and they were acceptable to and accepted by both parties.”  Within this passive language lurks some act of acceptance.  However, it does not seem to be the kind of acceptance that one party communicates to the other.  In these submissions, Mr Ford gives significance to the assertion that the Landlord “never indicated it was not willing to enter into a lease” with the Tenant.  Mr Dalton’s withdrawal from negotiations on 4 November 2020 was said to be a “change of mind”.  From this, according to the plaintiffs, it was to be inferred that Mr Dalton had earlier “turned his mind to the matters between the parties and considered a lease agreement was reached”. 
  3. [77]
    I would not exclude the possibility that, otherwise without communication, parties might act or refrain from acting and so objectively evidence and convey to each other a mutual intention to be bound.  Where, as here, parties have been negotiating written terms and conditions by exchanging emails and letters, there is little scope for an examination of uncommunicated thoughts to bridge the gap between their express negotiating positions.  In the present case, the evidence shows that, by 1 October 2020, Mr Dalton did not have an intention to be bound and Ms Luu had not communicated an intention on the Tenant’s part that it was bound. 
  1. [78]
    The plaintiffs’ primary contract case – that by 1 October 2020 the Tenant and the Landlord had reached a binding and enforceable agreement to lease the premises on the terms of the updated draft lease – fails.  Objectively, by 1 October 2020, neither the Landlord nor the Tenant had formed or communicated an intention to make a concluded bargain.  They were still negotiating.  Amongst other things, they were still dealing with the rent relief issue.  
  2. [79]
    These negotiations were within the scope of the “protection” expressed by Mr Dalton in the February letter and confirmed in the 19 August letter.  In a passage approved in Masters v Cameron, Neville J said in Santa Fe Land Co Ltd v Forestal Land etc Ltd:

“Now it is important not only in cases of the sale of land, but in all cases where letters pass with regard to the sale of any property which is being negotiated, that the parties should be able to protect themselves by some suitable words from being bound by the negotiation they are conducting.”[25]

  1. [80]
    The present dispute does not concern a sale.  However, the grant of a lease of the premises for five years with an option to renew for five years is the creation of a significant interest in the land.  Mr Dalton was careful and clear in protecting the Landlord from being bound in the lease negotiation.  The Landlord’s express intention was that it would not be bound until the lease was signed and all other issues were concluded.  This is part of the evidence that there was no common intention to be bound by 1 October 2020. 
  2. [81]
    The plaintiffs have an alternative contract case.  It is based on what the parties communicated to each other, and the knowledge they had of the surrounding circumstances up to 16 October 2020.  It is convenient to record the further matters occurring between 1 and 16 October 2020, before considering the alternative contract case.

13 October 2020

  1. [82]
    On 13 October 2020, Mr Willing sent an email to Mr Dalton.  In it, he asked:

“How are you going with the lease for Ultra Tune Nerang?  We are hoping to install a new franchisee on November 9, but the sale is conditional on having a lease in place.

Please feel free to call me should you have any questions.”

  1. [83]
    Mr Willing was cross-examined about this email.  He described it in this way:

“I’m emailing Mr Dalton to see how he was going with the lease, and whether he decided to sign it, I guess.  …  And reminding him that we’ve got a new franchisee coming in and the sale is dependent on the lease being in place.”

  1. [84]
    This email was the first communication to Mr Dalton about a sale of the franchised business to a particular purchaser with a settlement date.  It was also the first relevant communication between the Landlord and the Tenant since Ms Luu’s 1 October email.
  2. [85]
    Mr Dalton did not respond to Mr Willing’s email.

16 October 2020

  1. [86]
    At about 8:23 am on 16 October 2020, Ms Luu sent an email to Mr Dalton.  Its subject was “Yenny Luu wants to share the file 200924 Lease (-LL)(1).pdf with you” and its text was, “To view 200924 Lease (-LL)(1).pdf, sign in or create an account.” 
  2. [87]
    As I understand Ms Luu’s evidence, the document she wanted to “share” was a scanned copy of the updated draft lease document signed by Mr Buckley and witnessed by Mr Chong on 23 September 2020.  The email did not communicate as much.  No copy of any document was attached.  Mr Dalton’s evidence was that he did not “sign in or create an account” and did not view the shared pdf document.
  3. [88]
    Also on 16 October 2020, Ms Luu sent a letter to the Landlord enclosing “the lease executed by our director”.  In this letter, Ms Luu asked Mr Dalton to:

“Please sign both copies and return one to us at the address below:

Yenny Luu

Ultra Tune Australia

PO Box 2086

Camberwell West VIC 3124

If you have any queries please do not hesitate to contact the writer.”

  1. [89]
    Ms Luu sent the letter and its enclosure by Express Post to the Landlord’s post office box at Redlynch, near Cairns. There is no evidence of the time it was sent. 
  2. [90]
    There is no evidence of the day or time the Express Post package arrived at the Redlynch Post Office box.  16 October 2020 was a Friday.  For the plaintiffs, Mr Ford submitted it may have been delivered three or perhaps five days after the date it was posted.  Mr Dalton did not identify the date he saw it, merely that it probably was not within a few days of 16 October.  He recalled that he opened the express post envelope “subsequently”.  He found it contained a “printout of a lease” and he saw it had been signed on behalf of the Tenant.[26] 
  3. [91]
    More likely than not, the express post envelope was delivered between Monday 19 and Wednesday 21 October 2020 and opened by Mr Dalton within a day of being delivered.  It follows Mr Dalton had the document, signed by Mr Buckley for the Tenant, at earliest by 20 October and at latest by 22 October 2020. 

The alternative contract case

  1. [92]
    By their alternative contract case, the plaintiffs contend that, by 16 October 2020, the Tenant and the Landlord had reached a binding and enforceable agreement to lease the premises to the Tenant on the terms of the updated draft lease.
  2. [93]
    For the reasons set out above, objectively considered, by 1 October 2020 the Landlord and the Tenant did not have a common intention to be bound by such an agreement.  Their negotiations were continuing.  What, if anything, changed by 16 October 2020?
  3. [94]
    The Landlord did not communicate anything to the Tenant between 1 and 16 October 2020.  The intention of the Landlord was not altered by Ms Luu posting the signed document to Redlynch.  It remained as expressed by Mr Dalton in his correspondence of February, 19 August, and 10 September 2020. 
  4. [95]
    Objectively considered, the sending of two signed copies of the document is evidence that the intention of the Tenant had changed.  From 1 October 2020, when Ms Luu had communicated that the Tenant was likely to sign the lease in the form of the updated draft lease, if the Landlord agreed to waive the April 2020 rent, the Tenant had moved to delivering two signed copies, without qualification.    
  5. [96]
    A reasonable person in the position of the parties may have understood the delivery of two signed copies of the document as an offer by the Tenant to enter into a binding and enforceable agreement with the Landlord on those terms.[27]  Such a person would not have understood the gesture as an intention that the Tenant was already bound.  Objectively considered, in the context of the preceding negotiations, the delivery of the signed document conveys that the Tenant had executed it with the intention that it become of contractual force and take effect when the Landlord becomes bound by it.  It did not show an intention to be legally bound either immediately or subject to the fulfilment of a condition.  No condition existed.  The parties had dealt on the basis that no legal obligations would arise until the Landlord signed an instrument binding itself.  It was for the Landlord to convey an estate in the land to the Tenant.  The Tenant could have withdrawn its offer at any time before Landlord communicated an acceptance. 
  6. [97]
    The Landlord had not asked the Tenant to sign the document.  Objectively considered, the mere receipt of the Tenant’s offer was not an acceptance of it by the Landlord or otherwise evidence of an intention on the part of the Landlord to be bound.  Of course, it is unlikely the signed document was received by the Landlord by 16 October 2020.
  7. [98]
    If the Landlord had executed one or both copies signed by Mr Buckley, and had sent one back to Ms Luu or informed her it had been executed, or had otherwise communicated to the Tenant an intention to be bound, that would likely have been effective to create a binding agreement, indeed a lease between the parties.  None of these things occurred.  None could have occurred by 16 October 2020, because the document was just beginning its journey to Redlynch, and no one had communicated what had occurred to Mr Dalton. 
  8. [99]
    The plaintiffs’ alternative contract case allows no time for the Landlord to receive and retain the signed document after 16 October 2020.  It does not proceed on the basis that any conduct after 16 October signified an agreement to be bound.  It propounds a common intention by that date, when Mr Dalton did not know any document had been signed. 
  9. [100]
    In the circumstances, the plaintiffs’ alternative contract case – that by 16 October 2020 the Tenant and the Landlord had reached a binding and enforceable agreement to lease the premises on the terms of the updated draft lease – fails.

The promissory estoppel case

  1. [101]
    In the alternative to the contract claims, the plaintiffs seek equitable relief.  They say it arises from a promissory estoppel, preventing the Landlord from denying there is a binding and enforceable agreement to lease the premises to the Tenant on the terms set out in the updated draft lease.
  2. [102]
    The plaintiffs contend that by 1 October 2020 or by 16 October 2020, each of them assumed or expected that there was an enforceable agreement between the Landlord and the Tenant.  They say the Landlord knew that the Tenant was relying on that assumption or expectation.  They say the Landlord also knew that the Tenant may suffer detriment if the assumption or expectation was not fulfilled.  And they say the Landlord failed to disabuse the Tenant of the correctness of the assumption or expectation, on which the Tenant was conducting its affairs.[28]
  3. [103]
    Mr Ford submitted that, on the plaintiffs’ evidence, it was clear that they assumed from at least 1 October, if not by 16 October 2020, that a binding lease existed between the parties.  He described the assumption as being “manifest” on 16 October 2020 when a signed copy of the updated draft lease was sent to the Landlord.
  4. [104]
    The parties adduced further evidence about their dealings, with each other and with a proposed new franchisee, across this period and shortly afterwards.  Some of this further evidence is relevant to the plaintiffs’ estoppel claim.

 Further evidence for the estoppel case

  1. [105]
    According to Mr Willing, in August and September 2020, Mr and Ms Schilling of the Licensee were more likely speaking with other interested parties and not with the eventual buyer of their franchise business.[29]   
  2. [106]
    On 11 September 2020, Ms Luu sent a lease summary to Mr de Bondt, copied to Mr Willing and Mr Chong. It is assumed to have been a summary of the terms and conditions in the updated draft lease.  In her covering email, Ms Luu wrote, “I am pretty happy with all the terms set.”  She reminded Mr de Bondt of four of the lease negotiation issues, about which, she wrote, “I have not informed the franchisee yet as per George’s instructions”.[30]  These issues were: removal of the storage container on 30 days’ notice; payment of $1,997.53 overdue back rental; retouching the floor; and commercial cleaning.  The email continued:

“The only thing he [Mr Dalton] was insistent on was the diamond grinding when we leave the premises which we have already spoken about and I don’t think is extremely unreasonable.

The current franchisee will also most-likely be gone before we have to diamond grind the premises.

I will send an email to Kel and Karen [Schilling] later for them to confirm that they are happy with all terms ect [sic].

The landlord is still considering rent relief at this time and I would say signing the lease will go a long way in winning his favour.

But other [than] the items above I think I’m happy with the terms.

If we are all in agreeance George can you please sign the lease summary?”

  1. [107]
    Mr de Bondt said he signed the lease summary submitted by Ms Luu.  He explained it was a document that outlines the salient points of the lease.  His signature, as National Operations Manager, is part of the process before a new lease is presented to Mr Buckley for signature.  After he “signed off” on the lease summary, Mr de Bondt had no further involvement with the matter.  It did not come back to his attention until after Mr Dalton had told Mr Willing that the Landlord was not proceeding with a new lease.[31] 
  2. [108]
    On 16 September 2020, Ms Luu sent an email to Ms Schilling of the Licensee, copied to Mr Willing.  Ms Luu attached a copy of the updated draft lease and, in the body of her email, summarised “the essential terms”.  Ms Luu asked Ms Schilling:

“Please obtain your own independent legal advice as to the suitability of this lease to your individual circumstances.

Should you be agreeable to all the terms please reply via return email and we [w]ill sign the lease on your behalf.

Should you have any questions please do not hesitate to contact me.”

  1. [109]
    Ms Luu’s reference to the Tenant signing the lease on behalf of the Licensee may indicate some confusion about the legal effect of the instrument and the underlying relationships between the Landlord and the Tenant and between the Tenant and the Licensee.[32]  The Licensee would not be a party to any lease between the Landlord and the Tenant.  Underlying Ms Luu’s inapt language was the Tenant’s intention to recover from the Licensee all rent and outgoings due to the Landlord.  The Tenant would seek to do so under the licence it granted the Licensee.  In the same way, the Tenant would also seek to pass on to the Licensee all its other obligations under a lease. 
  2. [110]
    In any case, Ms Luu’s email made plain that the Tenant was not acting under an assumption or expectation that there was a legally enforceable agreement between the Landlord and the Tenant at that time.  Having received the email, the Licensee cannot have shared such an assumption or expectation.  Ms Luu was communicating that the Licensee had the chance to agree or disagree with the terms of the updated draft lease document and the ancillary issues before anything would be signed. 
  3. [111]
    On 23 September 2020, Ms Schilling replied to Ms Luu:

“We are happy with the new lease on the following conditions:

  1. There is to be no requirement for us to provide a bank guarantee to the landlord (this requirement is only to apply once we sell our business & the bank guarantee is to be provided by the new franchisee/business owner[)].
  1. There is to be no requirement for us to pay the legal costs of Ultratune and/or the landlord relating to the preparation of this new lease.
  1. Can you please confirm that the above is in order.”
  1. [112]
    In her oral evidence, Ms Luu explained that between 23 September 2020 and when she sent her 1 October email to Mr Dalton, she was “talking to the franchisee about various items.”  The tendered documents indicate the “talking” was done by email. Ms Luu gave no evidence of oral communications.  Ms Luu explained the communications in this way:

“We would always prefer that they [the franchisee] agree.  However, operations … if they wanted to save a really good site, they have the option to override that and, I guess, agree to do things even if the franchisee doesn’t. 

… from the 23rd of September to the 1st of October, we gave the franchisee a – you know, a chance to come along for the journey, I guess you could say.  Because ultimately, they would be the one who was paying the rent, paying the outgoings and things like that.  So we would always prefer that they agree rather than not.”

  1. [113]
    Ms Luu’s evidence on this topic differed from that of Mr Willing.  He said of the UTA group’s practice, “we won’t sign a lease unless the franchisee is satisfied with what’s in the lease.”  Neither Ms Luu nor Mr Willing is authorised to sign a lease for the Tenant.  Nor is Mr de Bondt authorised, even though he is the head of what Ms Luu calls “operations”.  Only Mr Buckley can make such a decision.  He is briefed and advised by UTA staff, including Mr de Bondt, for that purpose.  The evidence of Ms Luu and Mr Willing reflects their, apparently different, observations of UTA group practice. 
  2. [114]
    In fact, on 23 September 2020, the Tenant, by Mr Buckley, had executed the updated draft lease document. His signature was witnessed by Mr Chong.  Neither Mr Buckley nor Mr Chong gave evidence.  There was no evidence of any kind about their knowledge or involvement with the lease negotiations before, on or after this date. 
  3. [115]
    On 25 September 2020, Ms Luu replied to Ms Schilling’s 23 September 2020 email in this way:

“I have sought instructions from operations and we can advise as below:

  1. There is no requirement for you to provide a bank guarantee, the purchaser however will be required to do so.
  1. You will be required to pay for the legal fees of the landlord for the preparation and negotiation of this new lease.

In settling the lease, the landlord also required the payment of the following:

  1. $1,997.53 payable for underpayment of rental from 1/7/2017-5/12/2019.  From our records we can see that rental from 2014-2019 has stay[ed] consistent even though a CPI increase was warranted.  The landlord has only backdated the rental for one year instead of 5 so this is not a bad compromise.  We note however he is yet to send us an invoice for this amount.  Please see attached the Customer Summary as provided by the landlord.[33]
  1. The landlord requires commercial cleaning be conducted for all areas in particular the washroom area.

Should all these conditions be met we can settle the account and settlement can occur.

Can you please confirm if you are agreeable to these terms?”

  1. [116]
    This seems to be the first time Ms Luu informed the Licensee of the ancillary matters of outstanding rent and commercial cleaning.  Notably, in her email Ms Luu did not reveal to the Licensee that copies of the updated draft lease document had been made, and these had been signed by Mr Buckley two days earlier. 
  2. [117]
    Ms Schilling replied to Ms Luu the same day:

“We are waiting for a credit for rental relief from April – covid 19!

We have had rent 2x increases since 2015!  Please check our rental records.

… This is an unfair claim as we are on month to month since July 2016!

We are hoping to settle in 4 weeks & feel a commercial clean is not required & we are not agreeable to this term.

As for the last 6 yrs, we have kept the premises cleaner & tidier than when we occupied.

We have incurred 5 yrs of expenses by annually painting the floor coverings at a cost to us of approximately $5000.

Prior to our occupation of premises the landlord paid for the floors to be painted – Dalton family trust.

We really feel this is penny pinching by a greedy landlord.  Please get back to me today please by email or phone…”

  1. [118]
    This was clearly not the Licensee’s agreement to all the terms of the proposed new lease.
  2. [119]
    On 1 October 2020, the day by which the plaintiffs say an estoppel operated, three emails passed between Ms Luu and Ms Schilling.
  3. [120]
    The first was from Ms Luu:

“We are happy with the lease if you are, it has been signed and is ready to be posted as soon as we have your confirmation.

I understand there are some items outstanding e.g. the legal fees and the rent arears that you have discussed with Joel [Willing] as well.

Can you please confirm how you would like to proceed?”

  1. [121]
    Ms Luu revealed to Ms Schilling that the updated draft lease document had been signed.  However, she told Ms Schilling it would not be posted to the Landlord without Ms Schilling’s “confirmation”.  Plainly Ms Luu is awaiting the agreement of the Licensee. Ms Luu said it was up to Ms Schilling to confirm how she would like to proceed.
  2. [122]
    In the second email, Ms Schilling replied to Ms Luu:

“The rent issue of our credit in April really needs sorting out[.]  the landlord is claiming We owe $1900.  He owes us $3387.13, so surely it’s makes sense to do the credit of approx. $1400 to us.

I really need it sorted in order to present the lease please.

Could you please Ask Joel to call me today, after you guys have a look at it.”

  1. [123]
    In this email, Ms Schilling did not provide the confirmation Ms Luu had sought.  On the contrary, Ms Schilling re-raised the rent relief issue.  The sum Ms Schilling said was “owed” was one month’s rent, including GST, for April 2020, which the Licensee had paid.
  2. [124]
    The third email was from Ms Luu to Ms Schilling, copied to Mr Willing with the entire preceding email chain:

“As per your downturn report in April [2020] the store experienced a downturn of 47.88%.

The landlord is only obliged to give you 50% waived and 50% deferred of your downturn.

With your Pending sale I would assume you do not want the deferral as you would need to pay this off at settlement anyway.

Therefore the landlord is only obligated to give you 23.94% of your rental as a waiver which equates to $810.88.

The landlord could be nice and give you the full waiver however … as mentioned he is reluctant to discuss this until the lease is signed.

I will get Joel to give you a call as well to explain.

In the meantime I will email the landlord again to confirm if we can discuss the waiver.”

  1. [125]
    Ms Luu’s email does not evidence any assumption or expectation that there is an existing binding agreement between the Landlord and the Tenant.  She continues to treat with Ms Schilling on the basis that the Licensee’s agreement is required before the negotiations on the new lease are further progressed.   I note, in passing, that much of this communication is invention.  Mr Dalton had never said he was reluctant to discuss rent relief before a new lease was signed.[34]  On the contrary, he had discussed it.  At the time Ms Luu sent this email, as Ms Luu knew, he was still considering the request for a waiver of the April 2020 rent.  
  2. [126]
    Ms Luu then sent her 1 October email to Mr Dalton, again asking for rent relief in the form of a waiver of the April 2020 rent ($3,062.39, before GST).  At that time, Ms Luu had been pressing for, but did not have, the Licensee’s agreement to the terms of the updated lease document and the other negotiating or ancillary issues. 
  3. [127]
    In her oral evidence, Ms Luu said that after her 1 October email to Mr Dalton, she “was waiting for an answer in relation to that.”  Ms Luu explained:

“I really wanted to, I guess, close the book on this chapter for our previous franchisee.  So I would, you know, tidy everything up and move on.”

  1. [128]
    Ms Luu agreed that “operations can make a decision to sign a lease without a franchisee’s approval”.[35]  When asked whether that was so in this instance, she said, “Yes, it was.”  Of course, Mr de Bondt had approved the lease summary and Mr Buckley and Mr Chong had signed the lease document more than a week before the Licensee was told of the lease terms and ancillary issues and asked whether it agreed.   
  2. [129]
    When asked whether the Licensee agreed to the terms of the updated draft lease, Ms Luu answered, “Yes.”  This is inconsistent with the contemporaneous documents.  In the email communications with Ms Luu on 1 October 2020, Ms Schilling did not agree.  She wanted Ms Luu to press for rent relief.  Ms Luu understood this at the time, because she pressed for rent relief in her 1 October email to Mr Dalton.  She pressed for a waiver of the whole April 2020 rent, not for the $810.88 she had told Ms Schilling was payable.  The plaintiffs tendered no communication in which the Licensee agreed to the lease terms without qualification, such as an insistence that April’s rent be waived. 
  3. [130]
    Mr Willing was asked about these communications, which were copied to him.  He said he understood from the emails between Ms Schilling and Ms Luu of 1 October 2020 that Ms Luu was not going to go ahead with the lease until the rent relief was sorted out to the satisfaction of the Licensee.  He did not recall having a specific conversation with Ms Schilling about rent relief at about this time.  So, he was unable to give evidence that the Licensee consented to the lease terms.   
  4. [131]
    Mr Willing was asked about the “outcome” on the $1,997.53 outstanding rent due to the Landlord for the 2018-2019 financial year.  He told the court:

“We agreed to pay that to the landlord.  And we pretty well accepted that we’d just have to pay it.  Doesn’t matter if we don’t get it from the Schillings.  We’ve just got to pay it.  So we decided to pay.  That’s why I was calling Mr Dalton [on 4 November 2020] for an invoice for the back rent that we owed.”  

  1. [132]
    In fact, this internal process for signing a lease had occurred by 23 September 2020. 
  2. [133]
    Ms Luu and Mr de Bondt gave some evidence about their roles in the internal process for signing a lease.  Each of them likely knew Mr Buckley had or was about to sign the updated draft lease on 23 September 2020.  Mr Chong, manager of Ms Luu, must have known by then, as he witnessed Mr Buckley’s signature.  The Tenant concealed from the Licensee the fact that the document had been signed.  Ms Luu did not mention it in her emails sent to Ms Schilling on 23 and 25 September 2020.  Ms Luu revealed it to Ms Schilling only on 1 October 2020, but on the basis the signed document would not be posted to the Landlord until the Licensee had confirmed that should happen. 
  3. [134]
    Ms Luu did nothing that could reveal to the Landlord that Mr Buckley had signed the document for at least 23 days.  On 13 October 2020, when Mr Willing asked Mr Dalton how he was going with the lease, he conveyed the impression that the ball was still in Mr Dalton’s court.  He did not say the Tenant had signed the document.  From this conduct, I infer that the document was signed by Mr Buckley for internal convenience – to be produced if required.  It was not to be produced or used to bind the Tenant in any way during the time it was concealed from the Landlord. 

Dealings with a “new franchisee”

  1. [135]
    In the meantime, the Tenant and the Licensee had been dealing with a prospective new franchisee.  Evidence of this is also relevant to the assumptions or expectations alleged in plaintiffs’ estoppel case.
  2. [136]
    Back in November 2019, Ms Luu had told Mr Dalton that he would be given “details of the new franchisee once this has been confirmed.” See [17] above.  No such details were provided.  In July 2020, Mr Schilling told Mr Dalton the Licensee was waiting for one of a few interested parties to be approved by UTA.  On 9 September 2020, Ms Schilling had said three parties were wanting a copy of the lease.  On 13 October 2020, Mr Willing told Mr Dalton that UTA was “hoping to install a new franchisee on November 9, but the sale is conditional on having a lease in place.”  
  3. [137]
    On each of the September and October 2020 occasions, Mr Dalton was told a new fixed term lease would be required before the existing business could be sold and a new franchisee installed.  By the last communication, he was told of a 9 November 2020 settlement date, but that it was subject to a lease being in place. 
  4. [138]
    As noted above, the 13 October 2020 email was the first Mr Dalton knew “something more concrete going on with a potential sale of the business.”  Even then, the name of the incoming franchisee was not revealed. Mr Dalton thought, without a lease in place, there would not be “a transaction between the current franchisee and a new incoming franchisee.” This was what Mr Willing told him. 
  5. [139]
    Mr de Bondt briefly explained the process UTA followed to approve “a prospective or an intended franchisee”. 

“They send in an application.  They let us know about themselves.  The state manager will typically speak with them over the application, satisfy himself, in this case, that the entity is worthy of being a franchise – franchisee.  That comes to my desk.  I will read through it all.  Where necessary, I’ll talk with the state manager about the incoming people, and then once I’m satisfied, I will sign off on that document, and then that goes to Yenny [Luu], typically.”

  1. [140]
    The evidence of what the UTA employees did is consistent with this generally described process.
  2. [141]
    On 2 October 2020, Mr Willing interviewed Alexander Gumkowski of Ventose Pty Ltd (Ventose) about purchasing the Licensee’s business and becoming an Ultra Tune franchisee at Nerang.
  3. [142]
    On 6 October 2020, Ventose completed a franchisee application form, applying to UTA to become the franchisee for Nerang.  In it Ventose agreed to a special condition that it pay a training fee of $3,300.
  4. [143]
    On 9 October 2020, Ventose signed a contract (the Purchase Contract) to purchase the Ultra Tune Nerang business from the Licensee for $150,000.  Each of the Licensee and Ventose was represented by solicitors in respect of the sale. 
  5. [144]
    On 12 October 2020, Mr Willing approved Ventose’s application to be a franchisee and sent it on to Mr de Bondt. 
  6. [145]
    On 13 October 2020, the Licensee signed and – through its solicitor – returned the Purchase Contract to the solicitors for Ventose, making a change to one of the items.[36]  So the conditional contract was in place from this date.  The Purchase Contract was subject to common conditions, including finance and due diligence within 21 days. 
  7. [146]
    The Purchase Contract was also conditional upon special conditions that had been inserted into the otherwise standard terms.  It was conditional on Ventose “being granted a sub-lease of the premises on terms satisfactory” to Ventose. Ventose could terminate the Purchase Contract if it had not been granted a sub-lease on satisfactory terms by 6 November 2020.  Settlement was to occur on 6 November 2020.  The Purchase Contract was also conditional on Ventose “being approved by [UTA] and being granted a new franchise agreement or assignment of the existing franchise on terms satisfactory” to Ventose by 6 November 2020.  If Ventose did not obtain the new franchise or the assignment by 5:00 pm that day, it could terminate the Purchase Contract. 
  8. [147]
    On 13 October 2020, as noted above, Mr Willing sent a follow up email to Mr Dalton asking, “How are you going with the lease”, and giving the first notice of a “sale” to a “new franchisee”.  It was a very prompt notice.  The Licensee had only just signed the Purchase Contract and UTA was yet to approve Ventose as a franchisee. 
  9. [148]
    Mr Dalton did not reply to the email. 
  10. [149]
    At 4:07 pm on 15 October 2020, Mr Schilling sent an email to Mr de Bondt and Mr Willing:

“Can I ask that the lease for Ultratune Nerang be finalised by the end of this week.

As you would no doubt be aware this has been going on far to long.  It is now at the point that it may well cost us the sale of our business.

As you can well understand this needs to be sorted out now.  I’m not sure where the hold up is but I know it’s not us so it’s either Rod Dalton or Ultratune.

I would appreciate your urgent action on this matter.”

  1. [150]
    Mr de Bondt did two things.  At 4:09 pm, he sent Mr Schilling’s email on to Ms Luu, copying it to Mr Willing, without comment.  He also approved Ventose as suitable to be an Ultra Tune franchisee.
  2. [151]
    Mr Schilling’s email shows that on 15 October 2020 the Licensee did not assume or expect a binding and enforceable lease was in place.  I am satisfied that by this date Mr de Bondt and Ms Luu knew Mr Buckley had signed the updated draft lease document.  If they assumed there was a binding and enforceable agreement, they did not communicate this to Mr Schilling.  No one for the Tenant replied to him communicating a different view to the one he had expressed.  This conduct indicates these persons working for the Tenant did not then assume that a binding agreement was in existence.
  3. [152]
    As noted above, it was on 16 October 2020 that Ms Luu sent the updated draft lease document, signed by Mr Buckley, to Mr Dalton.  Her covering letter did not communicate to the Landlord that the Tenant (or the Licensee) was acting on the assumption or expectation that there was already a binding and enforceable agreement.  It merely opened the prospect that, if the Landlord signed and returned the document, as requested, there would be such an agreement.  The letter and signed document were received by the Landlord between 20 and 22 October 2020.  Mr Dalton did not reply before 4 November 2020.  When cross-examined about why he did not think to write back immediately, he said, “I was going to continue correspondence in due course.”  He thought there was no reason to do anything “in a hurry.”
  4. [153]
    The plaintiffs submit that their assumption or expectation is evidenced by training provided to Mr Gumkowski of Ventose, the incoming franchisee. 
  5. [154]
    According to Mr Willing, sometime in October 2020, he conducted five days of training for Mr Gumkowski at a Brisbane Airport hotel.  He said the training: 

“covers off on lots of things, starting with the history of the Ultra Tune brand and what we’re all about, and what the services are that we provide, and it also provides quite a bit of training on our point of sale system.  That’s the bulk of it.”

  1. [155]
    It is likely the training happened after Mr de Bondt approved Ventose on 15 October 2020.  Given the short period to settlement of the Purchase Contract, Mr Willing probably conducted the training soon afterwards.  An email chain between Mr de Bondt and Mr Willing indicates they planned for Mr Gumkowski to do the training in the week starting 26 October 2020.
  2. [156]
    At no point did anyone from UTA or the Tenant inform Mr Dalton that training was occurring.  There is no evidence that Mr Dalton knew the training was happening. 
  3. [157]
    By 4 November 2020, the Purchase Contract remained conditional upon UTA entering into a new franchise agreement with Ventose and on the Tenant granting Ventose a sub-lease on terms satisfactory to Ventose.  No agreements of those kinds had been signed.  No evidence was adduced that any drafts had been produced by UTA or the Tenant or sent to Ventose or its solicitors for consideration.  Given the tight time frame for completion of the Purchase Agreement, one would expect these agreements to be well advanced, if by this date the Tenant assumed or expected a binding lease agreement had been concluded. 
  4. [158]
    On 4 November 2020, Mr Willing called Mr Dalton and spoke with him by telephone.  Mr Willing again enquired about the lease.  Mr Dalton informed him that he had decided to discontinue negotiations, as the Tenant did not feature in his plans for the premises.  When pressed for a reason, he said he was put off by the communications he had received from the Licensee.
  5. [159]
    Mr Willing described what he did after the telephone call:

“I took instruction from my legal and my manager.  And following that, I set up a meeting with the incoming franchisees and let them know that we had an issue with the lease moving forward, and that the landlord had decided that he no longer wanted to enter into a lease with us.  From there, we – we made some promises to the incoming franchisee; gave him some assurances that – that we would support him in another premises if we needed to.”

  1. [160]
    When asked why he did this, he told the court there were a couple of reasons:

“The outgoing franchisees, the Schillings, were at this point pretty desperate to get out.  They – Karen Schilling had pretty chronic health issues and was in and out of hospital at the time.  So that was the – probably the main factor for her and her husband, Kel, as to why they wanted to sell the franchise.  So, her health was rapidly becoming worse.  They were also selling some investment properties that, I think, might have been securing the business.  So, we had the outgoing franchisees who were pretty well desperate to get out for their own personal reasons.  And we had an incoming – excuse me – franchisee who had – they had – they had resigned from their current employment and were excited about purchasing the franchise, and they really wanted to do it.  The outgoing franchisee wanted to go; they wanted to come in.  So, I did – well, we decided to do whatever we could to make that process, well, complete.” 

Whether Mr Willing held the alleged assumption or expectation

  1. [161]
    In his evidence in chief, Mr Willing explained:

“I took the view that we had an agreement, even though we hadn’t signed – well, I hadn’t got signatures and put pen to paper, because we –  I had been communicating at this point with Mr Dalton since 2019, and throughout that process he never indicated that we might not have a lease or that we wouldn’t – or we didn’t have an agreement.  It was all, I guess, in the affirmative or it was all positive, and we were all just sorting out the – the details, dotting the i’s and crossing the t’s, and never for a second felt that we didn’t have an agreement.”

  1. [162]
    The following exchanges in cross-examination give a further insight into Mr Willing’s assumption as Ultra Tune Qld State Manager:

“MR RYALL: Can I say that at that time, you knew, because Mr and Mrs Schilling had told you, that they, to sell their business, needed to have a lease, and meaning a fully signed lease to show incoming purchases?

MR WILLING:  That is true.  Yes.

MR RYALL: And you knew that there wasn’t such a lease, didn’t you, at the time of the correspondence on 1 October?

MR WILLING: Yes.  Everybody knew that.  Everybody knew that there wasn’t a signed lease.  But we had been negotiating this lease for some time.  So, I took that to mean that we were very close to having a signed agreement.  We had an agreement, both Mr Dalton and …

MR RYALL:  The truth was, wasn’t it, that you weren’t sure but you were pretty confident that it would all turn out in the end, because you had almost everything but hadn’t ‑ ‑ ?

MR WILLING: Yeah.  I believed we had an agreement.  We were just formalising it with signatures, pen to paper.”

  1. [163]
    Mr Willing said in his three years of working with UTA, “I’ve never had a landlord pull out of a lease after we’ve signed it.”
  2. [164]
    From October 2019 until 4 November 2020, Mr Willing confidently expected the parties would continue in their negotiations and would reach a binding agreement.  His confidence was reinforced by the long period of the negotiations during which the Landlord had not withdrawn.  Over this period, none of his contemporaneous documents disclosed an assumption or expectation that a binding agreement had already been reached.  His email of 13 October 2020, and even his telephone call to Mr Dalton on 4 November, tend to show he was still awaiting Mr Dalton’s assent.  Indeed, he was chasing Mr Dalton for such agreement.  Although he had initiated the discussion with Mr Dalton, he had not been a negotiator once detailed terms were raised.  Ms Luu had performed that role over eight months.  Mr Willing thought, if the Tenant and the Licensee could be brought to accept the most recent draft lease terms, then the Landlord would sign.  The view I formed watching Mr Willing give his oral evidence was that he thought “No news was good news” as far as the negotiations were concerned.  
  3. [165]
    Considering his oral evidence in the light of the documentary record, I am not satisfied that Mr Willing assumed a binding agreement was already in existence.  Rather he “confidently expected the transaction to go through” in due course. 

Whether Ms Luu held the alleged assumption or expectation

  1. [166]
    At the trial, Ms Luu was asked whether, before sending off the signed lease document, on 16 October 2020, she was “waiting on anything from the landlord before there was, to your mind, a deal?”  Her evidence was:

“On the 1st of October, to me, the lease was – the lease issue was done.”

  1. [167]
    She did not elaborate. 
  2. [168]
    Ms Luu was familiar with what she described as the usual process she followed internally when dealing with a lease for premises occupied by a franchisee:

“Usually the landlord would give us a lease.  I would read and review that lease, and bring to operations any clauses and amendments I would have for them to approve [them to] send back to the landlord, and these negotiations go back and forth for a little while, until everyone agrees with all the terms.  And, obviously, we’d also bring the franchisee into it as well, and we make sure that they have agreed to all the terms, and then we would send the lease to be signed and get it back to us, and then send it back to the landlord.”

  1. [169]
    This describes a perfectly usual process for entering into a lease.  Importantly, the negotiations continue “until everyone agrees with all the terms” and UTA “make sure” the Licensee has also “agreed to all the terms”.  Neither of those things occurred in the present case.  Ms Luu arranged with Mr de Bondt for Mr Buckley and Mr Chong to sign the updated draft lease document on 23 September 2020.  This was before the Landlord and the Tenant had agreed all matters and before the Licensee had done so.  
  2. [170]
    From the contemporaneous documents and the oral evidence about how and why Ms Luu came to write the 1 October email, I am not persuaded that she assumed or expected a binding agreement was in existence at that time.  She knew the negotiations between the Landlord and the Tenant were continuing.  She was still seeking to bring the Licensee on the “journey”.  She was trying to persuade the Landlord to agree to rent relief, so that, in turn, the Licensee would consent to the terms of the updated draft lease and the Landlord’s remaining requirements about the ancillary issues. 
  3. [171]
    Nothing happened after 1 October that could account for Ms Luu having the alleged assumption or expectation by 16 October 2020.  The Landlord had given no further or different indication of its position.
  4. [172]
    As I understand the evidence, Ms Luu acted on Ms Schilling’s 15 October plea for a new lease to “be finalised by the end of this week”.  Perhaps taking this as the Licensee’s agreement to the updated draft lease terms and the remaining ancillary matters, Ms Luu sent the signed document to Mr Dalton the next morning.  Perhaps she shared the experience of Mr Willing that a landlord had never “pull out of a lease” after the Tenant had signed it. 
  5. [173]
    It is doubtful that Ms Luu held the alleged assumption or expectation about the status of the lease.  In her written communications, Ms Luu had used the expression “agreed” very loosely. Whatever the reason for sending the signed document, there was no reasonable basis for her to adopt an assumption or have an expectation that the Landlord had already agreed to be bound by its terms.  On the evidence, I am not satisfied that Ms Luu held such views.

Whether Mr de Bondt held the assumption or expectation

  1. [174]
    In his oral evidence, Mr de Bondt was asked why he said he was “flabbergasted” and surprised when he discovered the Landlord did not want to enter a new fixed term lease with the Tenant for the premises. He said it was:

“Because from where I sit, the negotiation occurred over a period of time which was going very well.  There was good communication both ways, over a protracted time, I must say, but it was a – it was good communication both ways, and at no point did I ever feel that this negotiation was in jeopardy.”

  1. [175]
    Like Mr Willing, Mr de Bondt assumed and expected the negotiations would lead to a binding agreement.  I am not persuaded he assumed or expected a binding agreement was already in existence at any time before he learned, on 4 November 2020, that Mr Dalton was not proceeding. 

Whether the Licensee held the assumption or expectation

  1. [176]
    No one gave evidence for the Licensee. 
  2. [177]
    On 10 September 2020, Mr Dalton had made clear to Ms Schilling that “until there is an executed lease there is no lease document that we can show your interested parties.”  The evidence considered above shows that, at no point after that date did Ms or Mr Schilling assume or expect that a binding agreement to lease was in existence.  On the contrary, the documents show an assumption on the part of Ms Schilling that a lease was yet to be put “in place”. 
  3. [178]
    I am not satisfied the Licensee held the alleged assumption or expectation.     
  4. [179]
    As matters stood on 1 and on 16 October 2020, the Tenant and the Licensee did not assume or expect there was a binding and enforceable agreement to lease.  Both knew the lease negotiations were continuing with the Tenant attempting to procure the Landlord’s agreement to a rent waiver.  Both assumed and expected those negotiations would eventually (perhaps shortly) produce a binding and enforceable lease agreement.  

Whether the Landlord acted unconscionably

  1. [180]
    Given the conclusions reached above, it is not necessary to consider whether the Landlord’s conduct was such that equity should prevent it from denying that a binding agreement was made.  For completeness, I will deal briefly with the question of whether the Landlord’s conduct was, broadly considered, unconscionable.  
  2. [181]
    On 13 October 2020, Mr Willing had told Mr Dalton that the Tenant (and through it UTA) needed to know in advance of 9 November 2020 whether a lease was in place.  This was the first notice to Mr Dalton of this development.  The signed lease document had not been sent to Mr Dalton at this time.  The previous step in the negotiations had been on 1 October 2020, when Ms Luu proposed a waiver of one month’s rent. 
  3. [182]
    At no point before Ms Luu sent the signed lease document to him, had Mr Dalton indicated a binding agreement had been made.  He did not tell Ms Luu or Mr Willing that he would advise her or him if final agreement had not been concluded.  When he received the signed document, Mr Dalton did not retain it, in silence, for any more than about 15 days.  He did not “go slow” with a response, as measured by the pace of past negotiations or by the timeline Mr Willing had provided.  There is no evidence that he knew the Tenant or UTA or the Licensee was acting on an assumption or expectation that there was already a binding agreement to lease.  He did not know this from the time Ms Luu sent her 1 October email or from the time she sent the signed copies of the updated draft lease on 16 October 2020.  He did not know it when he received and opened the signed document.
  4. [183]
    As things transpired, on 4 November 2020 Mr Dalton told Mr Willing that the Landlord would not proceed with the lease.  This was five days before the expiry of the short deadline Mr Willing had earlier advised.  By that time, there is no evidence the Tenant had acted to its detriment in reliance on the alleged assumption or expectation.  UTA had provided training to Ventose, at Ventose’s cost. 
  5. [184]
    In the circumstances, the Landlord did not create or encourage an assumption or expectation by the Tenant or UTA or the Licensee that a binding agreement to lease was in existence.  It did not induce any action or forbearance by the Tenant or UTA or the Licensee.  The Landlord’s conduct, in short, was not unconscionable.

Conclusion on the estoppel case

  1. [185]
    For the reasons set out above, the plaintiffs’ estoppel claim fails.  I am not satisfied that the Tenant – whether in the person of Mr de Bondt, Mr Willing or Ms Luu – held the assumption or expectation that a binding agreement to lease was in existence at any time before Mr Willing’s telephone conversation with Mr Dalton on 4 November 2020.  No other person gave evidence for the Tenant.  Each of those who gave evidence assumed and expected that the Landlord, through the person of Mr Dalton, would grant the Tenant a new lease for the premises once all matters the subject of negotiation had been concluded.  Each confidently expected it would be on the terms of the updated draft lease document.  Their confidence was based on their experience as officers of a large franchise business.

Misleading or deceptive conduct claim

  1. [186]
    The plaintiffs’ final claim is that the Landlord engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law.  They seek relief in the form of a declaration, an injunction compelling the Landlord to execute the lease instrument, and damages pursuant to s 236. 
  2. [187]
    The “legislatively imposed standard of normative behaviour” in s 18 provides:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

  1. [188]
    The plaintiffs submit the Landlord remained silent between 1 October and 4 November 2020 about a “change of heart” on granting a new lease; and this silence was conduct likely to mislead or deceive, in contravention of s 18; and that, because of the conduct, the plaintiffs suffered loss or damage. 
  2. [189]
    The claim was not advanced in the closing address.  It may be dealt with in the following way.

Did the Landlord engage in conduct likely to mislead or deceive? 

  1. [190]
    The test of whether conduct breaches the statutory norm is objective.  It asks whether a reasonable person was likely to be misled or deceived by the conduct.  Here the conduct is alleged to be such as to lead such a reasonable person to believe the Landlord had agreed to be bound by an agreement to lease the premises to the Tenant on the terms of the updated draft lease. 
  2. [191]
    By the 1 October email, sent at 12:36 pm, Ms Luu invited a reply.  She did not fix a time for a reply.  A reasonable person in the Tenant’s position would have expected a reply to it within a reasonable time.
  3. [192]
    By 1 October 2020, the pace of those lease negotiations had been rather leisurely.  A little over three years passed between the expiry of the fixed term of the lease and Mr Willing initiating discussion with Mr Dalton.  108 days passed between that conversation and Mr Dalton providing the draft lease.  Ms Luu took 101 days to respond to that document and the associated lease negotiation issues.  Then, Mr Dalton took 86 days to respond with the updated draft lease.  At this point the pace quickened.  Ms Luu replied in 8 days and then Mr Dalton in 14 days.  Ms Luu then took 21 days to respond to Mr Dalton.  By then, the negotiations had been underway in general terms for 11 months. 
  4. [193]
    When the 1 October email was sent, UTA had not interviewed or approved an incoming franchisee.  There was no contract for the sale of the Licensee’s business.
  1. [194]
    In these circumstances, had Mr Dalton taken a month to respond to the 1 October email, the intervening period would not have led a reasonable person to believe that the Landlord had agreed to Ms Luu’s rent relief proposal.  Nor would it have led such a person to believe the Landlord had agreed to be bound by an agreement to lease the premises to the Tenant on the terms of the updated draft lease. 
  1. [195]
    The Licensee did not sign the Purchase Contract until 13 October 2020.  On that date, circumstances changed.  Mr Willing told Mr Dalton there was a contract to sell the franchise business.  He said the settlement date was 9 November 2020.  He communicated this information after asking Mr Dalton how he was going with the draft lease.  Ms Luu had sent no follow up email, so Mr Willing’s served that purpose. 
  2. [196]
    Neither Mr Willing nor anyone else for UTA or the Tenant told the Landlord the name of the proposed incoming franchisee or that the incoming franchisee had until 6 November 2020 to be satisfied about a sub-lease for the premises.  The only date mentioned was 9 November.  It was said to be dependent on a lease being “in place”. 
  3. [197]
    Sometime between 20 and 22 October 2020, Mr Dalton received and examined the signed lease document.  It arrived about a week after Mr Willing had urged Mr Dalton to respond to the 1 October email.  The plaintiffs contend that the “silence” or absence of a response from the Landlord was misleading or deceptive, in that it led them to believe the Landlord had entered into a binding agreement to lease the premises.  Rather than from 1 October 2020, the period of relevant “silence” is from 20 or 22 October until the telephone conversation on 4 November 2020. 
  4. [198]
    From the outset, Mr Dalton made clear that the Landlord was negotiating with the Tenant without being legally bound by anything proposed or arising or accepted during the lease negotiations.  He stated this position in writing to the Tenant, through Ms Luu of its Legal Department.  Although, at times, Ms Luu seemed not to understand the importance of this qualification, a reasonable person in the position of the Tenant would have understood it. 
  5. [199]
    In the circumstances, the Landlord’s failure to respond to Ms Luu’s 1 October email between 1 October and 4 November 2020 and the failure to respond to the signed lease document between about 20 or 22 October and 4 November 2020 is not conduct likely to cause a reasonable person in the position of the Tenant to assume that the Landlord had agreed to be bound to an agreement to lease.  The Landlord’s conduct did not breach the statutory norm in the way alleged. 

Proof of loss or damage

  1. [200]
    There is an additional problem for the plaintiffs’ ACL claim. 
  2. [201]
    The Tenant identified the cost of providing training to the incoming franchisee as its relevant loss.  There was no evidence the Tenant incurred that cost.  It is possible UTA did so.  Ventose agreed to pay $3,300 for that training.  No evidence was adduced to show that the Tenant suffered any loss by UTA providing the training, after accounting for any amount paid or owing by Ventose to UTA.
  3. [202]
    No one from the Licensee gave evidence.  In his closing address, Mr Ford submitted that the Licensee had “effectively got what they wanted, which was selling their franchise and moving on”.  The Licensee failed to prove it suffered any loss or damage because of the absence of a reply from the Landlord between 1 October and 4 November 2020. 
  4. [203]
    The claim for relief under the ACL should be dismissed.

Final orders

  1. [204]
    For the reasons set out above, there should be judgment for the Landlord on the plaintiffs’ claim.  The plaintiffs should pay the Landlord’s costs of the proceeding. 

Footnotes

[1]LTA, s 11(1)(b).

[2]LTA, s 31.

[3]LTA, ss 37, 38.

[4]Whether or not any of these things occurred does not affect any of the conclusions reached in these reasons.

[5]Mr Schilling is the sole director and company secretary. 

[6]The February letter is dated 17 February 2020, but that is plainly an error. It was emailed to the addressees at 6:17 pm on 14 February 2020.

[7]This seems to have been a drafting error, as the company search tendered by the Tenant shows Mr Buckley is the sole director the Tenant. An alternative would have been for the Tenant’s acceptance to be executed by an authorised legal practitioner: LTA, s 161(3A).

[8]If the mortgage creating the mortgagee’s interest in the land was registered, then any lease of a part of the land executed after registration of the mortgage would be valid against the mortgagee only if the mortgagee consented to the lease before it was registered: LTA, s 66.

[9]Mr Ford, for the plaintiffs, submitted this meant they were less important than the terms of the draft lease.  There is nothing in the correspondence between the parties to indicate this to be the case.  They were ancillary in the sense of being related to the proposed new lease.  Each was a matter the Landlord had insisted be resolved before any new lease would be finalised.

[10]“The container is situated in [a] Statutory easement.  If DNR1 gets a notice to move the container from an authorised authority then the container gets moved.  UT is on notice of this.” 

[11]In August 2020, Mr Dalton received a photograph of the retouched workshop floor.

[12]The email was sent at 3:10 pm.

[13] (1954) 91 CLR 353.

[14] (1954) 91 CLR 353, 360 (Dixon CJ, McTiernan and Kitto JJ).

[15]Masters v Cameron (1954) 91 CLR 353, 362 (Dixon CJ, McTiernan and Kitto JJ).

[16](1988) 18 NSWLR 540, 548E-549A (Gleeson CJ).

[17](2007) 69 NSWLR 603.

[18](2007) 69 NSWLR 603, 655 at [262], citing Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912–913; 1 All ER 98 at 114–115; Taylor v Johnson (1983) 151 CLR 422 at 429; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549–550.

[19](2002) 209 CLR 95.

[20](2002) 209 CLR 95, 105-106 at [25] (Gaudron, McHugh, Hayne and Callinan JJ).

[21]The Tenant’s relationship with the Licensee as licensor and licensee, now derived from the monthly tenancy, had been in place for more than five years.

[22]The Licensee appears to have had a more urgent timeline. 

[23]The 9 and 10 September 2020 communications between Mr and Ms Schilling and Mr Dalton are excluded from this consideration.

[24]Mr Willing and then Ms Luu had proposed that rent relief be applied for various periods within the initial term of the proposed new lease under negotiation.  Mr Willing had raised the topic in a separate communication.  Mr Dalton had replied separately.  Ms Luu had set the topic aside in her May email.  However, Ms Luu had included it in her 27 August email as an issue being negotiated with the proposed lease.  Mr Dalton had included it in his September letter, advising that the Landlord was still considering the matter.  Ms Luu had raised it again in the 1 October email, again in the context of the lease negotiations, putting a new rent relief proposal. 

[25](1910) 26 TLR 534, 534-535.

[26]Ms Luu’s covering letter indicates there should have been two signed documents in the envelope. I infer that two copies were in the envelope when Mr Dalton opened it.

[27]A cautious person, conscious of the significance of the creation of a leasehold interest in land, may have sought clarification from Ms Luu about the Tenant’s position on the rent relief issue.

[28]By the closing address, the plaintiffs no longer pressed a contention that the Landlord actively induced either the Tenant or the Licensee to adopt such an assumption or expectation.

[29]There was no evidence of any other or earlier application for UTA’s approval.

[30]George is evidently a reference to Mr de Bondt.

[31]He did have some involvement with the Licensee and he approved the proposed new franchisee.  These matters are dealt with below.

[32]Her appeals for rent relief from the Landlord for the Licensee may exhibit a similar confusion.

[33]This was a document Mr Dalton had enclosed in the February letter. 

[34]In May 2020, when 82 days had passed without a response to the draft lease, he had indicated rent deferrals were inappropriate if the relationship was to continue as a monthly tenancy.  He had asked for clarification and further information in support of the claim for rent relief.  He had suggested the relevant measure of sales downturn was year on year and not month on month.  He had reminded Ms Luu that the relationship was with the Tenant in the UTA group and not with the UTA’s franchisee.

[35]By “operations”, Ms Luu meant Mr de Bondt, the National Operations Manager for UTA.  His approval was required before a document could be submitted to Mr Buckley to sign.  For this purpose, Ms Luu provided a summary of the essential lease terms to Mr de Bondt to approve.

[36]The Licensee could not agree to a period of seller’s tuition prior to completion because UTA “absolutely prohibits an introductory period prior to settlement of a sale of a franchised business.”

Close

Editorial Notes

  • Published Case Name:

    Ultra Tune Properties (Qld) No 2 Pty Ltd & Anor v DNR1 Pty Ltd

  • Shortened Case Name:

    Ultra Tune Properties (Qld) No 2 Pty Ltd v DNR1 Pty Ltd

  • MNC:

    [2021] QSC 215

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    30 Aug 2021

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
Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
3 citations
Jump To
Cite 1 - (1988) 18 NSWLR 540
Cite 2 - (1988) 18 NSWLR 540
Cite 3 - (1988) 18 NSWLR 540
Ermogenous v Greek Orthodox Community of SA Ltd (2002) 209 CLR 95
3 citations
Jump To
Cite 1 - (2002) 209 CLR 95
Cite 2 - (2002) 209 CLR 95
Cite 3 - (2002) 209 CLR 95
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
1 citation
Jump To
Cite 1 - [1998] 1 WLR 896
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98
1 citation
Jump To
Cite 1 - [1998] 1 All ER 98
Masters v Cameron (1954) 91 C.L.R 353
4 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
Cite 4 - (1954) 91 C.L.R 353
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
1 citation
Jump To
Cite 1 - (2004) 218 CLR 451
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
3 citations
Jump To
Cite 1 - (2007) 69 NSWLR 603
Cite 2 - (2007) 69 NSWLR 603
Cite 3 - (2007) 69 NSWLR 603
Santa Fe Land Co Ltd v Forestal Land Timber and Railways Co Ltd (1910) 26 TLR 534
2 citations
Jump To
Cite 1 - (1910) 26 TLR 534
Cite 2 - (1910) 26 TLR 534
Taylor v Johnson (1983) 151 CLR 422
1 citation
Jump To
Cite 1 - (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
1 citation
Jump To
Cite 1 - (2004) 219 CLR 165

Cases Citing

Case NameFull CitationFrequency
Ultra Tune Properties (Qld) No 2 Pty Ltd v DNR1 Pty Ltd (No 2) [2021] QSC 2671 citation
1

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