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Ha Tinh Pty Ltd v Chin Yin Pty Ltd[2022] QSC 282

Reported at (2022) 12 QR 609

Ha Tinh Pty Ltd v Chin Yin Pty Ltd[2022] QSC 282

Reported at (2022) 12 QR 609

SUPREME COURT OF QUEENSLAND

CITATION:

Ha Tinh Pty Ltd v Chin Yin Pty Ltd [2022] QSC 282

PARTIES:

HA TINH PTY LTD ACN 634 024 230 AS TRUSTEE FOR HA LONG TRUST

(applicant)

v

CHIN YIN PTY LTD ACN 082 192 096 AS TRUSTEE UNDER INSTRUMENT 719255603

(respondent)

FILE NO/S:

10503 of 2022

DIVISION:

Trial

PROCEEDING:

Application

DELIVERED ON:

13 December 2022

DELIVERED AT:

Brisbane

HEARING DATES:

15 and 17 November 2022

JUDGE:

Wilson J

ORDER:

The parties are to provide a draft order in accordance with these reasons to Wilson J’s associate by 4pm on 14 December 2022.

If no order is provided by 4pm on 14 December 2022, then this matter is listed for further hearing at 9.30am on 16 December 2022 to finalise an order.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS  –  where the applicant and respondent entered into a lease for retail premises – where the lease contains a clause that requires the respondent to use their best endeavours to provide vacant possession – where the respondent seeks to enter a new lease with the existing tenant – whether the best endeavours clause prevents the respondent from doing so

INTERPRETATION – ADMISSIBILITY OF EXTRINSIC EVIDENCE IN RELATION TO INSTRUMENTS – WHERE EVIDENCE ADMISSIBLE – TO SHOW MEANING OF TERMS – where  the respondent seeks to rely on evidence of negotiations in construction of the best endeavours clause – where the respondent rejected a clause that explicitly prevented the respondent from entering a new lease with the existing tenant – where the lease contains an entire agreement clause – whether ambiguity is required before extrinsic evidence can be considered as an aid to construction – whether such ambiguity exists – whether the extrinsic evidence is admissible

EQUITY – GENERAL PRINCIPLES – MISTAKE – EQUITABLE REMEDIES – RECTIFICATION – WHERE MUTUAL MISTAKE – where the respondent submits that the parties intended for the best endeavours clause not to apply to the respondent offering the existing tenant a new lease – where the applicant’s representatives give evidence to the contrary – whether the parties had a common intention

Altis PropCo2 Pty Ltd v Majors Bay Development Pty Ltd [2022] NSWSC 403, cited

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, cited

Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, cited

Electricity Generation Corporation v Woodside Energy Limited & ors (2014) 251 CLR 640, cited

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, cited

Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348, cited

John & ors v Price Waterhouse [2002] EWCA Civ 899, cited

Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1, cited

Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, cited

New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740, cited

Selected Seeds Pty Ltd v QBEMM Pty Ltd & anor [2009] QCA 286, cited

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85, cited

South Sydney v Royal Botanic Gardens [1999] NSWCA 478, cited

Toll v Alphapharm (2004) 219 CLR 165, cited

COUNSEL:

M Liddy for the applicant

C Harding for the respondent

SOLICITORS:

T Lawyers Pty Ltd for the applicant

Sia and Sia Lawyers for the respondent

  1. [1]
    The respondent[1] is the owner and landlord of a retail shop in the Inala Plaza Shopping Centre. In relation to those premises, it wishes to enter into a new lease with the existing tenant, The Reject Shop (“the existing tenant”), for a period of three years.
  2. [2]
    However, the respondent has already entered into a prior written lease agreement in relation to the premises with the applicant.  The issue for determination in these proceedings is whether the respondent is permitted to offer a new lease to the existing tenant under the terms of the lease agreement with the applicant. 
  3. [3]
    Pursuant to that agreement, the respondent agreed to lease the premises to the applicant for 10 years (with a 10 year option). The lease agreement was negotiated at arm’s length, where both sides were legally represented.
  4. [4]
    The respondent agreed to the following term, included in clause 30 of the lease:

The landlord must use their best endeavours to obtain vacant possession of the Premises by the Sunset Date.

  1. [5]
    It is this clause that this matter turns upon. 
  2. [6]
    The existing tenant is holding over after their lease expired on 30 June 2022.  I note that the existing tenant’s lease did not include an option. The respondent acknowledges that the existing tenant can be given one month’s notice to vacate and does not assert that there is any impediment to giving vacant possession to the applicant in terms of the agreement if I find that it is not entitled to enter into a new lease with the existing tenant.
  3. [7]
    The respondent says that it is entitled to grant a new lease to the existing tenant, with the effect that vacant possession of the premises will not be provided to the applicant by 30 December 2022 (“the sunset date”).
  4. [8]
    The applicant’s position is that, on the proper construction of the lease signed between the applicant and the respondent, the respondent is precluded from doing so.
  5. [9]
    On 1 September 2022, Williams J granted an interim/interlocutory ex parte injunction in favour of the applicant that restrained the respondent from entering into any lease or agreement to lease which would derogate from the respondent being able to provide vacant possession of the premises to the applicant by the sunset date.   
  6. [10]
    The applicant seeks to make this injunction permanent and to prohibit the respondent from granting or entering into a new lease in relation to the premises.
  7. [11]
    The applicant seeks declarations that:
    1. the respondent must use its best endeavours to obtain vacant possession of the premises by 30 December 2022 or any extended sunset date under clause 30(c) of the lease, whichever may be the case; and
    2. the respondent is prohibited from doing any act, including entering into any agreement with any party, by way of lease or agreement to lease, extension of lease, amendment to lease, registering any instrument with the Titles Office or otherwise which would interfere with or derogate from the respondent being able to provide vacant possession of the premises to the applicant by 30 December 2022 or any extended sunset date under clause 30(c) of the agreement, whichever may be the case.
  8. [12]
    The relief sought is opposed by the respondent.
  9. [13]
    The respondent states that when the lease is construed in light of the relevant surrounding circumstances, particularly that the respondent rejected a proposed term that prevented it from extending the existing tenant’s lease, it is not precluded from entering into a new lease with the existing tenant.
  10. [14]
    Alternatively, the respondent‘s counterclaim states that the lease should be rectified so as to reflect the intention of the parties, the effect of which would be to allow it to enter into a new lease with the existing tenant.
  11. [15]
    In either event, it is the respondent’s position that the applicant is not entitled to the declarations it seeks.  
  12. [16]
    At the hearing, the applicant called two witnesses:
    1. Mr Thieu The Nguyen, general manager of the applicant business and other businesses owned by his mother, Ms Bien. 
    2. Ms Thi Nhung Bien, the sole director and shareholder of the applicant. Ms Bien owns and operates a number of retail food businesses with her sons.  
  13. [17]
    The respondent called Mr Peter Wen, a representative of the respondent (the owner of the premises, a family-run business owned and operated by Mr Wen and his parents).

The issues that need to be determined

  1. [18]
    The parties agree that there are two main issues in dispute:
    1. the proper construction of the lease, in particular clause 30 (“the construction issue”); and
    2. whether clause 30 should be rectified so as to reflect the true intention of the parties (“the rectification issue”). The respondent bears the onus of proof in relation to this issue.
  2. [19]
    It is only if I find in favour of the applicant in relation to the construction issue that I need to consider the rectification issue.

The relevant clauses of the lease

  1. [20]
    To determine these issues, it is necessary to consider the relevant clauses of the lease.
  2. [21]
    Clause 1 states:

This Lease is subject to:

a.  Vacant possession of the premises;

b.  The Tenant providing a copy of the tenancy fitout and signage plan to the Landlord for approval prior to any Landlord’s Works commencing.

c.  Landlord’s approval of the Tenant’s product menu.

  1. [22]
    The lease is in standard form, with additional and amended clauses added and agreed upon by the parties, one of which is clause 30.[2]
  2. [23]
    Clause 30 was amended several times before it was agreed to by the parties.
  3. [24]
    The initial version of clause 30 contained in the first draft of the lease, provided to the applicant’s solicitors on 16 September 2019, was as follows:

New clause 30 is inserted as follows:

Despite any other provision in this Lease this Lease is conditional on the Landlord providing vacant possession of the premises on or before the Starting Date.

If the Landlord does not provide to the Tenant vacant possession of the premises by 30 December 2022, then either party may mutually agree to extend the date or withdraw their intention to lease the premises and terminate this Lease. Should this lease [sic] be terminated, neither party has any claim for compensation or damages against the other party.

(“the first draft”)

  1. [25]
    The first version imposed no obligation on the respondent to provide vacant possession and stated that if the respondent had not provided vacant possession by the sunset date, either party would be entitled to terminate the lease.
  2. [26]
    On 26 September 2019, the applicant’s solicitors proposed the following:

Delete the second paragraph and replace with:

“If the Landlord is unable to provide to the Tenant vacant possession of the Premises by the Sunset Date (30 December 2022), then the Tenant may elect to either terminate the Lease or extend the Sunset Date and the Landlord must accept the Tenant’s election to extend the Sunset Date to a date up to 5 years from the original Sunset Date.

The Tenant may extend the Sunset Date more than once provided that the total extension periods do not exceed more than 5 years from the original Sunset Date.

In the event that the Starting Date commences on or after 30/06/2023, then the commencing base rental of the Lease shall be amended to reflect the base rental payable by the Tenant had the Lease commenced on 01/07/2022 and reviewed in accordance with the Lease. For example, if the Lease commences on 01/07/2023, then the base rental will be $417,000.00 per annum + GST + 3%.”

  1. [27]
    On 10 October 2019, the respondent’s solicitors provided the following comments in response to the applicant’s proposed amendments to clause 30:

In relation to the proposed clause which allows the Tenant to elect to terminate the Lease or Sunset Date – not agreed.

In relation to the proposed clause that would allow the tenant to extend the sunset date more than once – not agreed.

In relation to the paragraph proposing the commencing base rental would be amended to reflect the base rental payable had it commenced on 01/07/2022 – agreed.

  1. [28]
    On 15 October 2019, the applicant’s solicitors sent the following correspondence in reply to the respondent’s comments:

All 3 paragraphs of the clause requested are inter-related.

As stated above our client is investing a significant amount of money into this proposed project, and can’t take the risk of losing all their initial costs (i.e. legal, engineering, design etc.) simply because the existing Tenant does not move out by the Sunset Date (30/12/2022).

Our client insists with this request.

  1. [29]
    On 8 November 2019, the respondent’s solicitors responded with the following in relation to clause 30:

The Landlord will be agreeable to the proposed request to extend the sunset date, provided that the rent will be increased by 3% each year.

  1. [30]
    On 23 January 2020, the applicant’s solicitors provided the following comments on the proposed amendment:

Please reword the final paragraph in clause 30 to say that such paragraph will only apply in the event that the Tenant has not exercised its right to extend the Sunset date within 1 month of the original Sunset Date (so by 30 January 2023).

  1. [31]
    On 3 August 2020, Ms Bien, Mr Nguyen and the applicant’s solicitors met at the solicitors’ office. The solicitor went through her advice and the amendment schedules with Ms Bien and Mr Nguyen to inform them of the changes that had been made since they last met in person.
  2. [32]
    Ms Bien gave evidence that the applicant’s solicitors gave her advice that the wording of the vacant possession clause in the draft lease was risky because it did not prevent the respondent from leasing the premises to someone else or extending the lease with the existing tenant.
  3. [33]
    Ms Bien told their solicitors that this was unacceptable. Mr Nguyen agreed with her that the “crack” in the wording needed to be changed to make it clear that the respondent could not change their mind, could not lease the premises to someone else and could not extend the lease with the existing tenant, unless the existing tenant had an option in its lease that allowed it to extend the lease that the respondent had to comply with.
  4. [34]
    Ms Bien’s evidence is that, at that meeting, she said everything else about the lease was fine, but the above points needed to be made clear. They discussed various options, and after receiving legal advice, she instructed the applicant’s solicitors that they should propose amending the lease to insert relevant clauses to the effect that:
    1. the respondent must use its best endeavours to obtain vacant possession of the premises by the sunset date;
    2. the respondent must not extend the expiry date of the existing tenant’s lease;
    3. the respondent must inform the applicant of any delays within a reasonable time of being aware of such delay to the handover date; and
    4. the applicant could extend the start date up to five years if the respondent could not get the existing tenant to give it vacant possession.
  5. [35]
    To save time, Ms Bien pre-signed the signing clause on the draft version of the lease and stated that if the respondent agreed to the amendments, then the amended pages could be replaced.
  6. [36]
    Accordingly, on 4 August 2020, the applicant’s solicitors sent the following to the respondent’s solicitors:

Dear Colleague,

We refer to the above matter and our previous correspondences.

Upon our client attending our office to further review the Lease, our client is concerned that there are no provisions in the Lease to require the Landlord to use their best endeavours to obtain vacant possession from the existing tenant. Our client is concerned that the landlord may continue to extend the lease with the existing tenant past the sunset date and the extended sunset date. In that event, the Landlord will be able to terminate the lease under clause 30 and our client will suffer significant loss.

Therefore would you please make the following amendments to clause 30:

New clause 30 is inserted as follows:

  1. Despite any other provision in this Lease, this Lease is conditional on the Landlord providing vacant possession of the Premises on or before the Starting Date. The Landlord must use their best endeavours to obtain vacant possession of the Premises by the Sunset Date or any extended Sunset Date under clause 30(c) whichever may be the case. The Landlord must not extend the expiry date of the existing tenant’s lease and must inform the Tenant of any anticipated delays within a reasonable time of being aware of such delay.
  1. If the Landlord is unable to provide to the Tenant vacant possession of the Premises by the Sunset Date (30 December 2022), then the Tenant may elect to either terminate the Lease or extend the Sunset Date to a date up to 5 years from the original Sunset Date on the condition the Rent will be increased by 3% each year.

If agreeable please provide us with the amended lease.

  1. [37]
    On 19 August 2020, the respondent’s solicitors replied with:

Dear Colleagues,

Please see attached:

  1. Lease in track changes; and
  1. Lease in clean version.

We advise the Landlord agrees to the changes requested in your email below except for the inclusion of the words: “The Landlord must not extend the expiry date of the existing tenant’s lease and must inform the Tenant of any anticipated delays within a reasonable time of being aware of such delay.”

As per clause 30(a) the Landlord agrees to use their best endeavours to obtain vacant possession of the Premises by the Sunset Date. Clause 30(b) allows the Tenant avenues in the instance vacant possession cannot be obtained by the Sunset Date, the Landlord must accept the extension. Furthermore, the Tenant will only be suffering significant loss if money was spent on fitting out the premises once the Premises is handed over to the Tenant.

  1. [38]
    The email also attached an amended lease which reflected the clause as proposed by the respondent, relevantly, without the following rejected clause:

The Landlord must not extend the expiry date of the existing tenant’s lease and must inform the Tenant of any anticipated delays within a reasonable time of being aware of such delay. (“the rejected clause”)

  1. [39]
    The respondent places significant weight upon the rejected clause as a basis to state that it is not precluded from entering into a further lease with the existing tenant.  
  2. [40]
    On 24 August 2020, Ms Bien attended her solicitor’s office where she signed a document headed “Undertaking” where she confirmed that that she would like to enter into a contract to lease the premises and that she had been advised, among other things, that:
  1. The landlord has agreed to handover on 30 December 2020. However, T Lawyers has advised me that there are two situations that handover of the shop cannot take place on 30 December 2022 or may never happen at all.

a)  if the current tenant refuses to move out and the landlord has to sue the tenant’s and this legal case will take more than 5 years to finalise;

b) if the current tenant has options to extend their lease and choose to keep extending their options which then exceed 5 years.

  1. [41]
    Ms Bien states that that this advice reflected the discussions that she had with the applicant’s solicitors a few days earlier and, in her view, as the chance of either of these scenarios occurring was extremely low, they were risks that she could accept.
  2. [42]
    On 25 August 2020, the lease, which had been signed on behalf of the applicant,[3] was sent to the respondent’s solicitors. It contained the proposed new clause 30.  Also annexed were the disclosure statement signed by the respondent on 16 September 2019 and a legal advice report in which the applicant’s lawyer certifies, and the applicant’s representative confirms, that advice has been given that was relevant to “the term of the lease” and “any special or unusual terms or conditions of the lease”.
  3. [43]
    The lease was fully executed by the respondent (and thus, by the parties) on 19 February 2021, with the relevant part of the new clause 30 stating:
  1. Despite any other provision in this Lease, this Lease is conditional on the Landlord providing vacant possession of the Premises on or before the Starting Date. The Landlord must use their best endeavours to obtain vacant possession of the Premises by the Sunset Date or any extended Sunset Date under clause 30(c) whichever may be the case.
  2. If the Landlord is unable to provide to the Tenant vacant possession of the Premises by the Sunset Date (30 December 2022), then the Tenant may elect to either terminate the Lease or extend the Sunset Date and the Landlord must accept the Tenant’s election to extend the Sunset Date to a date up to 5 years from the original Sunset Date on the condition the Rent will be increased by 3% each year.

  1. [44]
    In an email dated 25 February 2021, attaching a certified copy of the fully executed lease, the respondent’s solicitor made the following comment:

As per new clause 30 this lease is subject to vacant possession. We will advise in due course.

The entire agreement clause

  1. [45]
    The lease contains an entire agreement clause which states:

23.7 Complete agreement

This Lease is the full agreement between the Landlord and the Tenant. The Tenant agrees that no matter was discussed or circumstance represented about the Premises or the Centre or this Lease that is not included in this Lease.

  1. [46]
    Jackson J in Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd[4] (“Coast Corp Pacific”) explained the purpose of an entire agreement clause:

[116]  An entire agreement clause like clause 38.1 is a common provision in a formal written contract. Sometimes, such a clause is described as a “merger” clause. In my view, it is better to describe it as an entire agreement clause. It operates by way of mutual contractual promises. It may also operate as an implied or express rescission by agreement of a prior contract. However, it does not operate as a merger of prior rights or liabilities, in the way that a cause of action merges in a judgment.

[117] Some cases draw an analogy between an entire agreement clause and the parol evidence rule. For present purposes, a broad working statement of the parol evidence rule may be taken from an article written in 2011 by the Hon JJ Spigelman AC:

“The traditional approach to the interpretation of a written contract in common law nations turned, in large measure, on the application of the parol evidence rule. The rule has been stated in different ways, but the core principle is that, when parties have reduced their contract to writing, a court should only look to the writing to determine any issue of interpretation.

The rule excluded extrinsic evidence for the purpose of interpretation. However, the rule applied only if the parties had, as a matter of fact, determined that the whole of their contract would be in writing. Extrinsic material could be considered to determine whether that was or was not the case.”

  1. [47]
    Jackson J further explained that an entire agreement clause embodies the entire understanding of the parties and constitutes the entire terms agreed on between them in relation to the subject matter:[5] 

… an entire agreement clause is a positive contractual provision containing a promise by each party to the other that the contract embodies the entire understanding of the parties and constitutes the entire terms agreed on between them in relation to the subject matter. For a party to depart from that promise is a breach of contract. When a party faced with a claim based on a contractual term inconsistent with the terms of an entire contract clause pleads it by way of defence, they set up a term of the contract itself and a binding contractual promise by the opposite party as to the extent of the terms of the contract. They do not merely rely on a presumptive rule of evidence.

The construction issue

  1. [48]
    In Toll v Alphapharm,[6] the High Court observed that the meaning of the terms of a contractual document are to be determined by what a reasonable person would have understood them to mean, which would normally require not only consideration of the text but also of the surrounding circumstances known to the parties and the purpose and objective of the transaction.
  2. [49]
    In Electricity Generation Corporation v Woodside Energy Limited & Ors (“Electricity Generation Corporation”), the majority observed that:[7]

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean.  That approach is not unfamiliar.  As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.  Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating.

(footnotes omitted)

  1. [50]
    The principles of contractual interpretation were discussed by Fraser JA (with whom Holmes JA and White J agreed) in Selected Seeds Pty Ltd v QBEMM Pty Ltd & Anor, as including that:[8]
    1. the interpretation of a contract involves the ascertainment of the meaning which its language would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contract;
    2. in any commercial contract, a court should adopt a businesslike interpretation;
    3. a court may depart from the strict literal meaning of a particular provision if an alternative construction which the words will bear is more reasonable and more in accord with the party’s probable intention; and
    4. the whole of the instrument has to be considered.
  2. [51]
    In determining this matter and interpreting clause 30, I have adopted the approach set out in these cases.
  3. [52]
    In this case, the respondent places weight upon the rejected clause as an aid to properly interpret what was meant by the agreed clause 30.
  4. [53]
    Deleted words in a standard form contract can be referred to as an aid to interpreting the meaning of ambiguous words in a term which remain.[9]  
  5. [54]
    However, clause 30 was the subject of protracted negotiations between the parties and cannot be characterised as deleted words in a standard form contract. In South Sydney v Royal Botanic Gardens[10] (“South Sydney”), Spigelman CJ, in dealing with a non-standard form lease,  stated:[11]

It is permissible to look at surrounding circumstances for purposes of interpretation of a contract "if the language is ambiguous or susceptible of more than one meaning". As this passage indicates, in this context the word "ambiguity" - ironically a word not without its own difficulties - does not refer only to a situation in which the words used have more than one meaning. A broader concept of ambiguity is involved: reference to surrounding circumstances is permissible whenever the intention of the parties is, for whatever reason, doubtful.

(citations omitted)

Is it necessary to identify ambiguity in the lease before consideration can be given by a court to surrounding circumstances as an aid to the interpretation of the lease?

  1. [55]
    The respondent notes that, in this case, evidence as to the circumstances surrounding the negotiation of the lease and, most importantly, the events of August 2020, were admitted into evidence without objection and as such may be considered by the court. 
  2. [56]
    However, such evidence is relevant to, and admissible in relation to, the rectification issue as raised by the respondent’s counterclaim.
  3. [57]
    In determining the proper construction of clause 30, the respondent states that this clause is required to be read having regard to the agreement as a whole, specifically the balance of clause 30 and clause 1.[12]
  4. [58]
    Further, the respondent submits that to properly interpret clause 30, regard should be had to the negotiations between the parties and, in particular, that the parties agreed that the rejected clause would not form part of clause 30.
  5. [59]
    The respondent submits that it is not necessary to identify any ambiguity in the lease before consideration can be given to the surrounding circumstances. It referred to Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd[13] where Kenny J stated:

As their Honours recognized in Toll, in some cases, though not normally, it may be unnecessary to consider the attendant circumstances, because, for example, the language of the document admits of only one meaning. The majority’s discussion in ABC v APRA indicates that it was such a case: see 105–7 per Barwick CJ and 114–15 per Stephen J. Normally, however, the meaning of commercial contracts will be judged by reference not only to the text but also to the relevant circumstances known to the parties.  It is also clear from Pacific Carriers and Toll that, generally speaking, it is permissible to have regard to the surrounding circumstances from the outset of the process of construction. The view that once had some currency – that one must first find some ambiguity in the text of the document before looking to extrinsic circumstances – no longer holds sway.

(citations omitted)

  1. [60]
    The respondent states that its submissions are not based upon adding anything to the lease, but rather the utilisation of extrinsic material to interpret what is already there.
  2. [61]
    I note that the lease contains an entire agreement clause which states that “no matter was discussed or circumstance represented about the Premises or the Centre or this Lease that is not included in this Lease”.
  3. [62]
    To support their position in relation to the use of extrinsic material where the lease contains an entire agreement clause, the respondent refers to a 2002 decision of the English and Wales Court of Appeal decision of John & ors v Price Waterhouse[14] (“John & ors”). 
  4. [63]
    In John & ors, Walker LJ observed that a conventional “entire contract” clause cannot affect the question of whether some matter of fact (whether or not in documentary form) is admissible as an aid to the process of construing a contractual document.  
  5. [64]
    Jackson J considered John & ors and the use of extrinsic evidence and the entire agreement clause in Coast Corp Pacific. His Honour acknowledged that in this jurisdiction and some other jurisdictions,[15] there is support for the conclusion that, notwithstanding an entire agreement clause, extrinsic evidence may be admitted for the purposes of interpretation.[16]
  6. [65]
    During oral submissions, I asked the respondent whether it had any comment on the decision of Coast Corp Pacific. The respondent flagged that it had not had the chance to properly review the case. I gave the respondent the opportunity to provide me with any comment it wished to make on that case, but none was provided.
  7. [66]
    In my view, the view expressed by Walker LJ in John & ors is not persuasive.
  8. [67]
    In Hope v RCA Photophone of Australia Pty Ltd,[17] the High Court considered the operation of an entire agreement clause. In that case, the lessee under a contract of hire of chattels alleged that the lessor supplied second hand equipment in breach of a term of the contract that the equipment be new. The lessor relied on the terms of the written contract between the parties. They did not provide expressly that the hired equipment was to be new. To contrary effect, a clause of the contract, in that case provided that it:[18]

contains the entire understanding of the respective parties with reference to the subject matter hereof and there is no other understanding agreement warranty or representation express or implied in any way binding extending defining or otherwise relating to the equipment or the provisions hereof on any of the matters to which [the contract] relate[s].

  1. [68]
    In that case, the question was whether proof of circumstances external to the terms of the written contract could conceivably provide material such that when it was applied, an implication might be discoverable, supporting a term that the equipment was to be new. It was held that the entire agreement clause effectually excluded an implied condition or a warranty.
  2. [69]
    In Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd, Allsopp P stated:[19]

Whilst “entire agreement” clauses have sometimes received separate treatment as a genus, leading to an approach, as evidenced by the appellants’ submissions here, that there is a rule of law related individually to them, it seems to me that they only reflect the epitome of the operation of the parol evidence rule.  The parties merely expressly avowed that the totality of the contract, about the relevant subject matter, is to be found within the four corners of the document…

  1. [70]
    In this case, the lease was negotiated between the parties’ lawyers, over a protracted period of time, to include an entire agreement clause which indicates the parties intended the contract to fully articulate their rights.
  2. [71]
    As Jackson J concluded in Coast Corp Pacific,[20] there is nothing in the common law of Australia which prevents the parties to a contract from agreeing, as a matter of contract, to an entire agreement clause. He noted that there are numerous policy reasons why parties should be free to do so and why a court should uphold the parties’ bargain if they do. Jackson J referred to Equuscorp Pty Ltd v Glengallan Investments Pty Ltd, where the High Court set out some of the reasons why parties are to be held to their written agreements:[21]

… in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time-consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside.

  1. [72]
    I note such policy reasons accord somewhat with the evidence of Mr Wen, who gave evidence on behalf of the respondent. Mr Wen accepted that a lease contract such as that in this case typically includes a provision that says, “this lease is the complete agreement between the parties”. He accepted that the reason for including such a term, insisting that the lease be reduced to writing, and be negotiated between lawyers is to avoid disputes about what was said.
  2. [73]
    Accordingly, in relation to the construction issue, extrinsic evidence is admissible to understand the background to this contract, but not as an aid to its interpretation.  It is necessary to identify ambiguity in the lease before consideration can be given to such evidence.

Does the relevant ambiguity exist?

  1. [74]
    The applicant submits that there is no ambiguity in this case. It states that:
    1. on the natural and ordinary meaning of the words of the best endeavours term, it is clear that the respondent cannot enter a new lease with the existing tenant, as they must use all reasonable endeavours to obtain vacant possession for the applicant; and
    2. the respondent is placing weight on a single term not included in the lease, the rejected clause, but ignoring the term that they have agreed to.
  2. [75]
    The applicant highlights that the respondent can provide the applicant with vacant possession. Mr Wen acknowledged that the respondent could provide a month’s notice to the existing tenant to vacate and that he expected the existing tenant would comply if given that notice.
  3. [76]
    The respondent submits that what constitutes ambiguity, in the relevant sense, is not only the situation in which words have more than one meaning. Rather, it says, with reference to South Sydney, a broader concept of ambiguity is involved, namely “whenever the intention of the parties is, for whatever reason, doubtful”.[22]  
  4. [77]
    The respondent submits that ambiguity arises in this case because of:
    1. the issue of vacant possession; and
    2. the requirement that the respondent is to use their best endeavours to obtain vacant possession.
  5. [78]
    The respondent submits that there is interaction between clauses 1 and clause 30 of the lease. Both clauses provide that the lease is either “subject to” or “conditional on” vacant possession of the premises being provided.  
  6. [79]
    The respondent submits that when the lease is read as a whole, including the requirement that the lease is subject to vacant possession of the premises, that ambiguity exists regarding the issue of vacant possession in light of the occupation of the premises by the existing tenant.
  7. [80]
    In my view, this does not amount to ambiguity.
  8. [81]
    It is clear that the lease is subject to vacant possession and that the respondent must use its best endeavours to obtain vacant possession. 
  9. [82]
    The terms “reasonable endeavours” and “best efforts” were discussed in Electricity Generation Corporation.[23] The following principles can be derived from that discussion.
    1. An obligation is not an absolute or unconditional observation.
    2. The nature and extent of an obligation imposed in such terms is necessarily conditioned by what is reasonable in the circumstances, which can include circumstances that may affect an obligor’s business. An obligor’s freedom to act in its own business interests in matters to which the agreement relates is not necessarily to be sacrificed by virtue of that obligation.
    3. Some contracts containing such an obligation contain an internal standard of what is reasonable, by some express reference relevant to the business interests of the obligor.
  10. [83]
    In this case, this lease does not provide a contractual standard for assessing what is reasonable. 
  11. [84]
    In Altis PropCo2 Pty Ltd v Majors Bay Development Pty Ltd,[24] Ball J summarised the meaning of the obligation to use best endeavours:[25]

An obligation to use best endeavours is to be understood as an obligation to do all that reasonably can be done in the circumstances to achieve the contractual obligation, but no more.  What constitutes ‘best endeavours’ must be “measured by what is reasonable in the circumstances, having regard to the nature, capacity, qualifications and responsibilities of the [party who bears the obligation] viewed in the light of the particular contract”.

(citations omitted)

  1. [85]
    Whether a party has used best endeavours to achieve a stated objective must be determined objectively in light of what, in fact, is required to be done in the circumstances as they exist to achieve the stated objective. In such a case, the party is required to do all that it reasonably can in the circumstances to achieve the contractual objective, but no more. It is necessary for the court to be appraised as to what those circumstances are to enable it to properly interpret that clause.
  2. [86]
    However, being appraised of such circumstances does not include any consideration of the negotiations between the parties or the rejected clause. In my view, such extrinsic evidence is of no utility in determining whether the respondent has used their best endeavours to obtain vacant possession.
  3. [87]
    The negotiations between the parties and the rejected clause are inadmissible in considering the construction issue.

What does clause 30 mean?

  1. [88]
    Clause 30 of the lease is prima facie clear in its terms:
    1. The lease is conditional on the respondent providing vacant possession of the premises on or before the starting date; and
    2. The respondent must use their best endeavours to obtain vacant possession of the premises by the sunset date which is 30 December 2022. 
  2. [89]
    If the respondent is unable to provide the respondent with vacant possession by 30 December 2022, then clause 30(b) of the lease states that the applicant may elect to either terminate the lease or extend the sunset date. 
  3. [90]
    The respondent has an obligation to use their best endeavours to obtain vacant possession of the premises by 30 December 2022. The content of this obligation must be measured having regard to the lease as a whole, and to the factual context in which the best endeavours fall to be exerted. This includes the qualifications, abilities and responsibilities of the respondent and may include matters affecting the respondent’s business or commercial in interests.
  4. [91]
    The respondent states that their obligation to use their best endeavours stops them from doing anything to negotiate any sort of agreement, or any other lease or occupation of the premises, with any other party except the existing tenant.
  5. [92]
    The problem for the respondent is that the language of clause 30 does not say this, nor does it convey such an understanding.
  6. [93]
    Clause 30 does not provide the respondent with a carve out to be able to negotiate a new lease with the existing tenant whilst still using best endeavours to obtain vacant possession.
  7. [94]
    The respondent acknowledges that clause 30 does not specifically prohibit it from taking any steps to negotiate with any other party bar the existing tenant. It submits that the best endeavours clause should be read in the context of the parties not agreeing to include the rejected term, as this leads to a different understanding of the best endeavours clause.
  8. [95]
    As I have already stated, the rejected clause is inadmissible in determining the construction issue.
  9. [96]
    Taking into account the permissible extrinsic evidence, that is, the evidence that provides the background to the negotiation, the interpretation of the clause is made quite clear.  There was an existing tenant in the premises.  The respondent obviously could not commit to providing vacant possession of the premises until that tenant left. 
  10. [97]
    The parties, through a formal process, engaged lawyers to negotiate the terms of their lease.  They intended that the lease be the complete bargain between them, and they incorporated a specific term into the lease to that effect.
  11. [98]
    In my view, the respondent negotiating a new lease with the existing tenant is not them using their best endeavours to obtain vacant possession of the premises by 30 December 2022.
  12. [99]
    This would remain my view even if I could take into account the extrinsic evidence that the respondent urges me to consider, i.e., the negotiations between the parties and, in particular, the rejected clause. 
  13. [100]
    The respondent’s position is effectively that the written agreement that was negotiated exclusively in writing over a long period of time between lawyers can only be properly interpreted by one clause that was left out, as opposed to a very clear clause that was left in.
  14. [101]
    During negotiations, two changes to clause 30 were proposed by the applicant: 
    1. that the respondent must use its best endeavours to obtain vacant possession of the premises by the sunset date; and
    2. that the respondent must not extend the expiry date of the existing tenant’s lease.
  15. [102]
    In the August 2020 email from the applicant’s solicitors, it was explained that the “best endeavours” clause was sought to be included because of a perceived concern that the respondent may continue to extend the lease past both the sunset date and any extended sunset date so as to enable the respondent to terminate the lease under clause 30 and thereby cause the applicant to suffer significant losses.
  16. [103]
    Mr Nguyen says that the proposed changes to clause 30 were to stop the respondent from “granting any lease to anyone else” and not just the existing tenant.  He says that he had concerns that without the new clause 30 being inserted, the respondent may have been able to enter into a new lease with any other party, such that the new clause was not just to deal with the existing tenant but other parties as well.
  17. [104]
    The first of these proposed amendments was agreed to by the respondent. The second proposed amendment was not, and the respondent places weight on this rejected clause in their interpretation of clause 30.
  18. [105]
    The respondent submits that the applicant’s interpretation of the lease is to the same effect as if the rejected clause had been specifically included. 
  19. [106]
    The respondent submits that the explicit rejection of the clause precluding the respondent from extending the expiry date of the existing tenant’s lease would lead a reasonable reader to conclude that neither party intended the remaining provisions of the lease to have that effect.
  20. [107]
    Further, the respondent submits that their interpretation of clause 30 is consistent with both elements of the proposed amendment to clause 30 having work to do, while also being consistent with the clear rejection by the respondent of the proposition that its rights to enter into a new lease with the existing tenant were affected. The work the respondent submits the “best endeavours” clause is left to do is to preclude the respondent from entering into a lease of the premises with any other party except the existing tenant,[26]  whereas the rejected clause related only to the respondent’s rights in respect of the existing tenant.
  21. [108]
    However, in my view, the language of clause 30 and the rejected clause does not convey such a meaning.
  22. [109]
    A term of the lease requires the respondent to use their best endeavours to obtain vacant possession.  When the lease is read as a whole, taking into account the extrinsic material, it does not reserve to the respondent a right to offer a new lease to the existing tenant (or any other party). I note that the respondent does not say that it at any stage said to any party, let alone the applicant, that it intended to reserve that right.
  23. [110]
    The applicant’s solicitors sent the respondent’s solicitors a letter on 4 August 2020, which set out that the applicant was concerned that the respondent would extend the lease with the existing tenant, and that there were no provisions requiring the respondent to use their best endeavours to obtain vacant possession. This was the letter in which the applicant proposed the rejected clause. The respondent’s solicitors’ reply did not explicitly reserve the right to offer a new lease to the existing tenant in rejecting that term.
  24. [111]
    The respondent pursuing a new commercial arrangement with the existing tenant is not consistent with its obligation to use their best endeavours to obtain vacant possession. It is the respondent’s choice whether it wishes to pursue such a new commercial arrangement; that choice is inconsistent with the respondent using their best endeavours to obtain vacant possession.
  25. [112]
    I note that Mr Wen did not appreciate the implications of agreeing to the best endeavour clause until later on. He stated that he just proceeded on the advice that it was “okay to agree” and did not understand the implications of the best endeavours clause until later.
  26. [113]
    Further, clause 30(a), which imposes the obligation upon the respondent to use their best endeavours, should also be read in light of clause 30(b), which is concerned with providing detailed machinery to deal with the situation where the respondent is “unable to provide to the tenant vacant possession of the premises by 30 December 2022…”
  27. [114]
    Clause 30(b) allows the applicant avenues in the event that vacant possession cannot be obtained or where the respondent was unable to obtain it, not where the respondent decides not to obtain it. The only reason, under the lease, for the respondent to not provide the applicant with vacant possession was where it was unable to do so. This does not extend to where the respondent chooses to enter a new lease with the existing tenant.
  28. [115]
    The use of the word “unable” to provide vacant possession (in the sense of being incapable) is telling. Such language is inconsistent with the respondent reserving to itself a general power to enter into a lease potentially on better terms or for a longer or shorter period with the existing tenant.
  29. [116]
    I note the language used by the solicitors when negotiating the term is consistent with vacant possession not being provided only where the respondent is “unable to” or “cannot” provide vacant possession. For example, in their email containing their rejection of the proposed clause, the respondent’s solicitors stated, immediately after rejecting the clause:

As per clause 30(a), the Landlord agrees to use their best endeavours to obtain vacant possession of the Premises by the Sunset Date. Clause 30(b) allows the Tenant avenues in the instance vacant possession cannot be obtained by the Sunset Date, the Landlord must accept the extension. Furthermore, the Tenant will only be suffering significant loss if money was spent on fitting out the premises once the Premises is handed over to the tenant.

  1. [117]
    In my view, the language used during the negotiations is inconsistent with the respondent reserving itself a general power to enter into a lease with the existing tenant.
  2. [118]
    Further, I note that the rejected clause is framed in terms that the respondent “must not extend the expiry date of the existing tenant’s lease.” The existing tenant’s lease had no option and expired on 30 June 2022.
  3. [119]
    The respondent states the new lease which it wishes to enter with this existing tenant has a commencement date of 1 July 2022, following on immediately from the expiry date of the previous lease on 30 June 2022.  As such, the respondent states that the real effect of the new lease would be to “extend” the existing lease.  The respondent submits that whether the mechanism by which the existing tenant was to remain a tenant at the premises was by extension of its existing lease or by way of a new lease immediately following its existing lease is inconsequential.
  4. [120]
    However, the respondent let the existing tenant’s lease expire by effluxion of time. The respondent has proffered a new lease, but it has not been signed by the respondent yet. Even if I could take into account the rejected clause in interpreting the lease, such circumstances are beyond its scope.
  5. [121]
    In my view, clause 30 precludes the respondent from entering into a new lease with the existing tenant.  The respondent agreed to use its best endeavours to give vacant possession of the premises to the applicant and there is no impediment to it doing so. Mr Wen, on behalf of the respondent, confirmed the existing tenant was holding over under an expired lease at the premises, and that there was no impediment to the respondent, under the terms of the expired lease, issuing the existing tenant with a month’s notice to leave after this decision is handed down, which he expected the existing tenant would comply with.

The rectification issue

  1. [122]
    In relation to the remedy of rectification, the respondent carries the onus of proof. What is required is that the parties had a common intention which continued until the execution of the agreement.   It is not necessary that there be some outward expression of accord.  The remedy of rectification is designed to relieve against the mistaken expression of the true agreement between the parties.  The existence in an agreement of an entire agreement clause is not a defence to rectification.[27]  
  2. [123]
    In New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co Ltd,[28] Clarke J, discussing the conditions necessary for a grant of the remedy of rectification, said that to found a decree for rectification of a written agreement in circumstances where the parties have used words, which when properly construed, do not express their true intention, it is sufficient that the plaintiff satisfy the court, to the requisite degree, that the parties had a common intention which continued until the execution of the agreement, which common intention was not embodied in the agreement. It is not necessary that there be some outward expression of accord.[29]
  3. [124]
    As observed by Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd,[30] the remedy of rectification is designed to relieve against the mistaken expression of the true agreement between the parties. 
  4. [125]
    In determining the actual intention of the parties, the evidence of intention should be viewed objectively, in the sense of not merely accepting what a party says was in his or her mind but instead considering and weighing admissible evidence probative of intention.[31]
  5. [126]
    I note that post-contractual behaviour will not be relevant to determining the objective meaning of contractual terms,[32] although post-contractual behaviour may have relevance to rectification of the contract where it is alleged that the contract does not express the true agreement between the parties.[33]
  6. [127]
    The respondent submits that the objective evidence supports a conclusion that, at the time the applicant entered into the lease, the true agreement between it and the respondent as understood by the applicant was that, while the respondent was precluded from entering into a new lease with a party other than the existing tenant, it remained entitled to enter into a new lease with the existing tenant.  
  7. [128]
    However, in my view, the evidence does not support such a contention. Mr Nguyen and Ms Bien did not accept such a contention. I found both of them credible witnesses and I accept their evidence. 
  8. [129]
    In all of the circumstances, there was no mistaken expression of the true intention of the parties.

The intention of the respondent

  1. [130]
    Mr Wen, in his affidavit, states that the respondent’s intention was that it would remain entitled to, and would not, by virtue of the agreement between it and the applicant, be precluded from, entering into a new lease with the existing tenant.
  2. [131]
    The respondent states that such an intention is consistent with the fact that the respondent has negotiated a new lease with the existing tenant, which has been executed by the existing tenant.  
  3. [132]
    At the hearing, Mr Wen accepted that at the time the lease with the applicant was being entered into, the respondent had not thought through whether it would offer the existing tenant a new lease or not.
  4. [133]
    Mr Wen said that he always intended to reserve the right to be able to offer a new lease to the existing tenant.
  5. [134]
    Mr Wen accepted, however, that he never said words to that effect to the applicant
  6. [135]
    Mr Wen stated that he did not think that the negotiations with respect to the proposed clause 30 altered the effect of the clause from what it was in the first draft to the final executed version of the lease, or that it reflected that the intentions of the parties changed. 
  7. [136]
    This is not consistent with the evidence of Mr Nguyen and Ms Bien, who gave evidence that they were concerned that the applicant carried too much risk and sought amendments to the lease to give them more security.
  8. [137]
    Mr Wen said that he thought the effect of what had been done was that he was keeping the option open for the respondent to either offer a new contract to the existing tenant, if that was what was in the best interests of the respondent, or to hold the applicant to the lease that had been signed if that was in the respondent’s best interests.
  9. [138]
    However, the applicant’s witnesses do not agree with such a contention. 

The intention of the applicant

  1. [139]
    Mr Nguyen and Ms Bien assert that it was never their intention, at the time the lease was entered into, for the respondent to be able to enter into a new lease with the existing tenant.  However, the respondent notes neither questioned the rejection by the respondent of the rejected clause.
  2. [140]
    The respondent characterises Ms Bien and Mr Nguyen’s evidence as “receiving some superficial support from advice they say they were provided by their solicitors”. However, in my view, it is a minimisation of this evidence to describe it as “superficial support”; it is anything but.
  3. [141]
    Ms Bien received advice from the applicant’s solicitors on 3 August 2020 that there are two situations where handover of the premises could not take place on 30 December 2022, or may never happen at all:
    1. If the current tenant refuses to move out and the respondent has to sue the tenants and this legal case will take more than five years to finalise;
    2. If the current tenant has options to extend their lease and chooses to keep extending their options which then exceed five years.
  4. [142]
    Such advice is consistent with the evidence that both Mr Nguyen and Ms Bien gave about their intention and belief.
  5. [143]
    The respondent states that Ms Bien and Mr Nguyen’s asserted belief does not receive support from the following matters:
    1. the fact that the amendments proposed to clause 30 of the lease were made at their request and were made, at least in part, to avoid the respondent being able to enter into a new lease with the existing tenant;
    2. their explanation that they thought the clause had been rejected because it was likely the existing tenant had an option in its lease with the respondent. The respondent says that both Mr Nguyen and Ms Bien are experienced businesspeople, and that they knew that it was a simple step to ascertain whether the existing tenant’s lease contained an option.  Had it been a matter of any significance, and, in particular, had they truly thought it explained the reason why the clause in question may have been rejected by the respondent, it would be expected that they would have taken the simple step of confirming the true position by a search;
    3. both Mr Nguyen and Ms Bien gave evidence to the effect that existing tenant was trading badly.  It was their evidence that even if the existing tenant had an option, they were very unlikely to exercise it. It must follow (and was accepted by at least Mr Nguyen) that if the respondent retained the right to enter into a new lease with the existing tenant, they thought it was unlikely that the existing tenant would have been interested in entering a further lease.  If the evidence of Mr Nguyen and Ms Bien is accepted in this regard, they cannot have had any concern, at the time the lease was entered, that the existing tenant would be interested in negotiating a new lease with the respondent; and
    4. while it is the case that an undertaking was signed by Ms Bien on 24 August 2020, that step was not undertaken at Ms Bien’s instigation or for the purpose of providing her with advice but was done at the instigation of her solicitors and for the purpose of providing her solicitors with an indemnity.
  6. [144]
    The respondent also states that Mr Nguyen gave evidence that he knew that the respondent was not agreeing to a restriction from being able to enter a new lease with the existing tenant. However, when this evidence is considered in its entirety, I am satisfied that no such concession was made:

Yes.  So you knew that the landlord wasn’t agreeing to a restriction from being able to enter into a new lease with The Reject Shop?Yes.

Okay.  And that’s the basis upon which you agreed to enter into the lease?No.

Well, you knew that the landlord – okay.  You’ve just given evidence that you knew that the landlord wasn’t agreeing to the restriction from being able to enter into a new lease with The Reject Shop?They didn’t agree to first part of the clause, which means they have to try their best endeavour to get us the premises – to us.  That means that they cannot enter into a new law – a new lease or extend the expiry date with The Reject Shop because the fact that we have a contract there and that clause did say – and they did agree – that they would try their best endeavour to get the premises for us.  Then that to us clearly means that they cannot extend or enter into a new lease with The Reject Shop.  Very clear.

Mr Nguyen?Yes.

What I asked you a moment ago and you agreed with me is that I said – that by the landlord rejecting the restriction about being able to enter – sorry – by rejecting that part of the clause that you suggested, they rejected, that that meant that they were not restricted into being able to enter into a new lease with The Reject Shop and   ?In   

   you agreed with that proposition?In that situation where if the land – The Reject Shop has an option, then they – then if they agree with that – with that – with our proposed clause, then it means that they would’ve been in breach the contract with The Reject Shop.  That’s the reason why we agreed for that to not be in the contract because it was reasonable.

Now, the clause that you put in – and you’ve given this evidence – was so that a new – and the particular part of the clause that I read out to you -

The landlord must not extend the expiry date of the existing tenant’s lease –

were agreed that that was so that a new lease couldn’t be entered into with The Reject Shop.  Now, that has been agreed – well, it’s that clause has not been agreed to by the landlord, so the effect of that, isn’t it, that they’re not agreeing with your proposition that they’re excluded from entering into a lease with The Reject Shop?That’s not our understanding   

HER HONOUR:   Do you understand the question?That’s not – that’s not our understanding at all. 

HER HONOUR:   So perhaps if we can withdraw them, the question may be simpler, because we’re – I am concerned whether the witness has understood – and it’s particularly that question that you asked previously, that   

MR HARDING:   I understand, your Honour.

HER HONOUR:      you particularly liked the answer to.  MR HARDING:   Yes.  All right.  Mr Nguyen, after the clause in relation to the expiry – the extension of the expiry date of the existing tenant’s lease was rejected by the landlord, you say in your second affidavit you had some discussions with your mother about that?Yes.

And I think I’m right to say that you said that well, they might have rejected that, because there could have been an option?Yes.

Yes.  See, it comes back to the question I asked you earlier.  Well, if that was the real reason that you thought that that was rejected, why not just do a search to find out if there was an option?Like I said, we made an executive decision earlier to say that even if they have an option, we would wait.  But we would not wait for more than five years.  Because we had other things going on and we wanted to continue with our life and do other businesses as well.

MR HARDING:   Yes.  So you were happy to wait for five years?If we were required to, not happy.

All right.  But when you were discussing with your mother why it is that this clause was rejected by the landlord, you didn’t think that it may be worthwhile just to do a search for an option to find out if your suspicions were correct?I didn’t think it was necessary, like I said.  If there was an option in The Reject Shop’s lease, and they exercise it, then to us, it means that we’re required to wait, and bec – we understand that doing any business there’s risk, and if that were – that was the risk, then we were willing to take it up to five years only, and that’s why we said it’s reasonable for the landlord to not have that clause in there. 

Because what I’m going to suggest to you, Mr Nguyen, is that the reason why again, you didn’t bother to check whether or not there was an option, was because you knew that the landlord was entitled to enter into a new lease with The Reject Shop, whether or not there was an option?No.

So the option just didn’t matter.  You disagree with that?I think if we have – if they have an option in there, and we were required to wait, then we would wait.  But we would not sign the lease if we knew if – that the re – the landlord has choice to choose whether between us or The Reject Shop after signing the lease with us, because we believe that we have a lease in place, fully executed, and there is a clause in there that we make sure that the landlord will try their best endeavour to get us the premises. 

  1. [145]
    When the whole of Mr Nguyen’s evidence is reviewed, it is clear that he did not consider that the respondent was reserving a right to enter a new lease with the existing tenant by not accepting the rejected clause.
  2. [146]
    The respondent submits that the reason why the applicant was not concerned about signing a lease without the rejected clause is that the protection the applicant was seeking was from the respondent signing a lease with another party, but not the existing tenant, and this was covered by the best endeavours clause rather than the rejected clause. 
  3. [147]
    However, both Mr Nguyen and Ms Bien did not accept such a proposition.
  4. [148]
    Ms Bien stated that her understanding was that if the existing tenant had an option, then the respondent would have had to enter a new lease with them. However, if there was not an option, she understood that the respondent could not enter a new lease with the existing tenant because of the lease the applicant had entered with the respondent, as otherwise there would be no legal effect to her signing the lease.
  5. [149]
    Mr Nguyen stated that the applicant accepted the risk that, if the existing tenant had an option, the respondent would have to extend the existing lease and that was why they did not press for the rejected clause to be included. He did not accept that he knew, at that point, that the respondent had the right to enter a new lease with the existing tenant regardless of the existence of any option. However, he said that they would not have signed the lease had they known that the respondent had a choice of whether to offer the applicant or the existing tenant a new lease. He gave evidence that he believed there was a lease in place, and the respondent had to use its best endeavours to get them the premises.  He accepted that they would have to wait for up to five years if the existing tenant had an option.
  6. [150]
    Mr Nguyen, when asked why he agreed to the respondent not including the rejected clause, gave two reasons:
    1. First, if the existing tenant did not have an option, Mr Nguyen considered the best endeavours clause meant that it was 100 per cent certain the applicant would get the premises, as the respondent had no legal obligation to extend the existing tenant’s lease.
    2. Second, the only risk the applicant had to assume was that if the existing tenant did have an option and exercised it, then the respondent would have to grant them that option or be in breach of the lease.
  7. [151]
    In all of the circumstances, I found Mr Nguyen and Ms Bien credible witnesses. Their evidence is supported by the relatively contemporaneous advice given to them by their solicitor. In my view, none of the matters raised by the respondent[34] are sufficient to contradict the clear evidence given by Ms Bien and Mr Nguyen.
  8. [152]
    In my view, the evidence does not support the contention that the parties had a common intention which was not embodied in the agreement. No person on behalf of the applicant was of the view that it was intended that, by entering into the contract, the respondent would be entitled to offer a new lease, or extend the existing lease, of the existing tenant.  Accordingly, the claim for rectification fails.

Orders

  1. [153]
    The applicant has provided a draft order which seems entirely consistent with the findings I have made.
  2. [154]
    Nevertheless, at the hearing, the respondent’s counsel sought an opportunity to consider these reasons before I make such an order.
  3. [155]
    Accordingly, I will allow the parties to consider my reasons and to provide a draft order in accordance with them. The issue of costs should be addressed in the draft order. 
  4. [156]
    The formal order of the court is:
    1. The parties are to provide a draft order in accordance with these reasons to Wilson J’s associate by 4pm on 14 December 2022.
    2. If no order is provided by 4pm on 14 December 2022, then this matter is listed for further hearing at 9.30am on 16 December 2022 to finalise an order.

Footnotes

[1]  An application was filed seeking declaratory relief and an injunction to support the sought declarations by the applicant on 1 September 2022. On that date, the applicant also filed an ex parte application for interim injunctive relief. That application was granted by Williams J on the same date. On 5 October 2022, Jackson J ordered (CD12) that the proceedings continue as if started by claim. The following day, the applicant filed their statement of claim. On 20 October 2022, the respondent filed their defence and counterclaim. Despite this, the parties referred to themselves throughout as the applicant and respondent.  For consistency, I will do likewise in my reasons.

[2]  Partially set out above at [3].

[3]  See [35] above.

[4]  [2018] QSC 305.

[5] Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, [120].

[6] (2004) 219 CLR 165, 179 [40].

[7] (2014) 251 CLR 640, 656 [35].

[8]  [2009] QCA 286, [34].

[9] See Burger King Corporation v Hungry Jacks Pty Ltd (2001) 69 NSWLR 558, [137]-[139], 260 Oxford Street Pty Ltd v Premetis [2006] NSWCA 96, [132]-[134] and A Goninan & Co Limited v Direct Engineering Services Pty Ltd. [No. 2] [2008] WASCA 112, [37]-[40].

[10]  [1999] NSWCA 478.

[11]  at [35], referred to in Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187, [138].

[12]  Set out above at [21] and [43].

[13]  (2006) 156 FCR 1, 22 [100].

[14] [2002] EWCA Civ 899, [67].

[15]  with reference to John & ors v Price Waterhouse [2002] EWCA Civ 899, [67] and Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218, 224.

[16] Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, [121].

[17]  (1937) 59 CLR 348.

[18] Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348, 350.

[19]  (2001) 117 FCR 424, 542.

[20] Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, [121]-[122].

[21] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, 483 [35].

[22] South Sydney Council v Royal Botanical Gardens [1999] NSWCA 478 at [35], set out at paragraph [53] of these reasons.

[23] Electricity Generation Corporation v Woodside Energy Limited & ors (2014) 251 CLR 640, 658-660 [41]–[43].

[24]  [2022] NSWSC 403.

[25] Altis PropCo2 Pty Ltd v Majors Bay Development Pty Ltd [2022] NSWSC 403, [72].

[26]  One of Mr Nguyen’s concerns.

[27] McDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152, 156.

[28]  (1986) 6 NSWLR 740, 740.

[29]  See also discussion in Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85, 99 [32] and 117 [103]-[104].

[30]  (1973) 128 CLR 336, 350.

[31] Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85, 102 [42].

[32] Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153, 164 [26].

[33] New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740.

[34]  Including those set out at [143].

Close

Editorial Notes

  • Published Case Name:

    Ha Tinh Pty Ltd v Chin Yin Pty Ltd

  • Shortened Case Name:

    Ha Tinh Pty Ltd v Chin Yin Pty Ltd

  • Reported Citation:

    (2022) 12 QR 609

  • MNC:

    [2022] QSC 282

  • Court:

    QSC

  • Judge(s):

    Wilson J

  • Date:

    13 Dec 2022

  • Selected for Reporting:

    Editor's Note

Appeal Status

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

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