COMPSYD PTY LTD v STREAMLINE TRAVEL SERVICE PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBY P, PRIESTLEY JA and MEAGHER 18 October 1989, 15 December 1989 [1989] NSWCA 46 LEASEHOLD — dispute between parties — settlement of action — orders entered by Supreme Court — later conversation between solicitors for parties — whether amounts to change of settlement — whether decision to the contrary by Needham J demonstrates error — held: It does not. CONTRACT — variation or rescission — applicable principles to distinguish. (1) The decision was based, in part on Needham J's opinion as to the credibility of witnesses; (2) His Honour's conclusion that the case was one of variation of the earlier settlement not a rescission of it was right. Tallerman and Company Pty Limited v Nathan's Merchandise (Victoria) Pty Limited (1957-58) 98 CLR 93 and Morris v Baron and Company [1918] AC 1; British and Beningtons Limited v North Western Cachar Tea Company Ltd [1923] AC 48 applied; (3) In so far as Needham J had failed to "flag" the issue of the Statute of Frauds this did not result in a mistrial. May v Gibson (1970) 71 SR (NSW) 79 distinguished. British and Beningtons Limited v North Western Cachar Tea Company Ltd [1923] AC 48 (HL) discussed and applied. Kirby P I agree for the reasons given by Meagher JA that the appeal should be dismissed with costs. Priestley JA I agree with Meagher JA. Meagher JA At all material times a parcel of land known as 226-228 Sussex Street, Sydney was owned in fee by the respondent Streamline Travel Service Pty Limited. Before 21 August 1987, the appellants Compsyd Pty Limited and Perin Pty Limited were lessees of these premises, but were in arrears in their payment of rent. This fact, together with disputes about a joint venture which all these parties contemplated entering together, led to litigation in which Compsyd Pty Limited was the plaintiff and the present respondent the defendant in the Equity Division of this Court, which on 21 August 1987 was settled before McLelland J. On that day his Honour made orders which, omitting inessential parts were as follows: 2. Note the agreement between the parties that the first defendant will grant to the plaintiff and Perin Pty. Limited a lease of the premises known as 226-228 Sussex Street upon the following terms: (a) the said lease shall be for a period commencing | September, 1987 and terminating on 31 March, 1988; (b) at a rental of $24,950 per calendar month the first such payment to be made on 1 September, 1987; (c) the said tenants shall pay all Sydney County Council Municipal rates, all Metropolitan Water Sewerage and Drainage Board rates charges and all fire service and fire telephone charges as are referable to the 2 UNREPORTED JUDGMENTS premises 226-228 Sussex Street, Sydney together with land tax payable in respect of the said premises on the basis that the said land was the only land owned by the first defendant for the duration of the lease with apportionment on a day to day basis and shall make such payments on or before the dates upon which they fall due or within 14 days of delivery of the accounts to the plaintiff whichever is the later; (d) the said tenants shall repay to the first defendant on or before | September, 1987 all such rates, taxes, fire service charges and electricity charges as have been paid by the first defendant in respect of the said premises from 1 August 1986 in respect of two thirds of the said rates and as from 1 September 1986 in respect of the whole of the said rates in each case up to 1 September 1987; (f) and otherwise on the same terms and conditions of the Memorandum of Lease submitted by Peter Cornelius Arthur Phillips and Just to Yee and Co. undercover of letter dated 16 March 1987 and executed by Compsyd Pty Limited excluding clauses 2(c), 7, 8, 10, 13 and 14 CL5(c) shall be restricted to the terms specified in clause (3) above. 3. Order that the cross defendants yield up possession of the premises 226-228 Sussex Street, Sydney to the first defendant on 1 April 1988. 5. Note the agreement between the parties that the plaintiff and Perin Pty Limited will upon such grant of lease hand to the solicitor for the defendants withdrawals of all caveats lodged in respect of premises 226-228 Sussex Street, Sydney claiming any interest of the said land greater than or different from the interest conferred in these Short Minutes and all caveats lodged in respect of premises 222-224 Sussex Street, Sydney. These orders, as I have said, were made by his Honour at the request of the parties, who had compromised their claims against each other. Accordingly, one would have expected that a lease of the kind described in the orders I have set out would have been in place by | September 1987. This did not happen, although the respondent's solicitors did draw and execute such a form of lease. There were two reasons for this. The first was that the solicitors for the appellants prevented it by lodging a caveat on the land, thereby provoking a state of affairs which was embarrassing, but which was also quickly resolved. The second was that the appellants found the terms of the lease described in the Court order not to their liking. At first, they thought the 7-month term too short for their purposes and sought a longer term. When their landlord rejected their overtures in this respect, they negotiated for a shorter term, to the intent that they deliver up possession of the premises within about 6 weeks of 1 September, between Mr Boulos on behalf of the appellants and Mr Cumines on behalf of the respondent. So far as is relevant, it was in the following terms: "Boulos: What I would need from you is to take 6 to 8 weeks to get everything organised to move out of here. Is that OK, Lionel? Cumines: That's no problem... Cumines: When you want to move out, 4, 5, 6 weeks, that's OK with me. You don't have to sign the lease, Mike. Boulos: Lionel, I just want to confirm that it would be no problem for us to stay here for 4 or 5 weeks while we make an arrangement to move elsewhere and pay you for that period at the same rent. Cumines: Mike, you don't have to confirm..." One might reasonably doubt whether, in the light of the solemn compromise of the proceedings before McLelland J, such an apparently casual conversation could justify a finding that the parties intended in any binding way to change the URJCOMPSYD PTY LTD v STREAMLINE TRAVEL SERVICE PTY LTD (Meagher JA) 3 settlement which had been reached in those proceedings. However, Needham J, who heard this case and from whose decision an appeal is now brought, held that such an intention did exist. There is no basis in this case for reconsidering his Honour's finding in this respect, based as it is, at least in part, on the credibility of the witnesses concerned. The sole question which arose, as his Honour found, was whether the parties intended merely to vary their respective rights flowing from this compromise eventually reflected in McLelland J's orders, on the one hand, or to rescind that compromise and substitute in lieu of it an entirely new arrangement, on the other hand. The appellants gave up possession of the premises on 23 November 1987, which prompted the respondent to seek specific performance of the agreement reflected in McLelland J's orders; but the respondent, having later sold the premises, on 16 November 1988 filed an amended summons seeking damages in lieu of specific performance. Those proceedings came on for hearing before Needham J, and he found in favour of the respondent. These proceedings are an appeal from his Honour's decision. His Honour found that the telephone conversation to which I have referred constituted an attempt to vary the original compromise rather than to rescind it; and as a contract required to be in writing cannot be varied orally, his Honour granted damages to the respondent for the appellant's breach of the compromise in its unvaried form. The appellants submit that his Honour should have found that the earlier compromise had been rescinded. Where there is an original written agreement and a later oral agreement altering the terms of that original agreement, the law compels one to categorize the later agreement as constituting either a variation of the original agreement or a rescission of it - at least in cases involving the Statute of Frauds. This was decided by the House of Lords in Morris v Baron Sho (1918) AC 1 and British and Benningtons Ltd v North Western Cachar Tea Co. Ltd (1923) AC 48. In Australia the distinction was accepted by the High Court in Tallerman and Co v Nathan's Merchandise (Victoria) Pty Ltd (1957 58) 98 CLR 93, and applied in numerous other Australian authorities. It is not a logically satisfactory distinction, as one of its originators has admitted (see per Lord Sumner in the British and Benningtons Case (supra), at 67-8. Hardly surprisingly, it has therefore been found very difficult of application, particularly in cases like the present which are borderline. However, in the present case, I am of the view that Needham J was correct. I find it impossible to find in the conversation which I have set out any manifestation of an intention completely to extinguish the original contract, as distinct from making sweeping amendments to it, and this is the test to be applied: see per Lord Haldane LC in Novis v Baron (supra) at 18. In particular, I can see no words used by Mr Cumines which expressly or by necessary implication evidence an intention to abandon the lessor's rights to the payment by the lessees of rates, taxes and other charges. For these reasons I am of the view that the appellant's main submission on the appeal must fail. The next challenge to his Honour's finding concerned the alleged impropriety of his Honour's finding that the Statute of Frauds barred giving affect to the agreed variation. The Statute should have been "flagged" in some way, it was said, and reference was made to the remarks of Hope J in May v Gibson (1971) 71 SR 79. The plaintiff's proceedings were by way of summons. There were no pleadings and hence no precise identification of the issues. What counsel for the defendants (the present appellants) - who was not its counsel at the appeal said at the trial is unclear: on one version he pleaded a rescission, on another version 4 UNREPORTED JUDGMENTS he pleaded that the telephone conversation in question amounted to either a variation or a rescission (or, alternatively, an imprecise global assertion that the original agreement had been superseded). We cannot be sure, although it seems more likely that a rescission was relied on. In any event what is clear is that in address neither counsel adverted to the distinction between variation and rescission and neither counsel addressed the question of the Statute of Frauds. It is certainly unfortunate that his Honour, having appreciated the legal problems whose existence escaped counsel's attention, did not relist the matter for argument on the questions to which they should have adverted but did not. In that event counsel for the defendants would have had the opportunity of addressing the question whether there was a note or memorandum of the conversation and whether any question of part performance should be explored. At all events, I am not disposed to allow the appeal on this ground for the following reasons: 1. The remarks of Hope J in May v Gibson are rather directed to the conduct of the parties in the litigation inter se, not to the behaviour of the Judge hearing the case; 2. if, as I believe is more likely than not, the only defence raised by the defendants was rescission, all his Honour need have done was make a finding that no such rescission had taken place; his finding that there had been an ineffective variation was unnecessary; and 3. in the unlikely event that the defendants could rely on some note or memorandum, or on some application of the doctrine of part performance, they could have applied for a new trial on the basis of fresh evidence, a course which they eschewed. The final challenge which the appellants mounted to his Honour's decision concerned the damages to be awarded. His Honour held, obviously correctly, that the proper measure of damages was the difference between the rent reserved by the lease and the rental value of the premises at the time of the lease. The plaintiff proved that various estate agents had advised him that, because of the shortness of the term of the lease, there were no tenants available for such a lease. His Honour therefore concluded that the rental value at the time of breach was nil. It was contended that there was no evidence before his Honour justifying this finding, as the evidence merely went to what the estate agents had told the plaintiff but was not evidence as to the underlying facts. As this objection does not seem to have been taken at the trial, and the evidence was admitted without objection and not subject to any limitation, I am of the view that it must also fail. I think the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for Appellant: DJM Bennett QC with SD Epstein Solicitors for Appellant: Peter Cornelius, Arthur Phillips and Just Counsel for Respondent: B Coles Solicitors for Respondent: Yee and Co