HEYSHAM PROPERTIES PTY LTD v ACTION MOTOR GROUP PTY LTD and ORS [1996] NSWCA 580

HEYSHAM PROPERTIES PTY LTD v ACTION MOTOR GROUP PTY LTD and ORS

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

HANDLEY, SHELLER and POWELL JJA 16 May 1996, 15 November 1996 [1996] NSWCA 580

Contract — Offer and acceptance — "Heads of Agreement" for grant of a lease of commercial premises — Whether binding agreement for lease.

Landlord and Tenant — "Heads of Agreement" for grant of lease — Draft lease provides for guarantee of proposed tenant's obligations — Draft lease not executed — Whether proposed guarantors liable.

Handley JA I agree with Sheller and Powell JJA.

Sheller JA For the reasons given by Powell JA this appeal should be dismissed.

The appellant's principal argument on the appeal was based upon what is called the fourth category of the principle stated in Masters v Cameron (1954) 91 CLR 253, which covers the case in which the parties are content to be bound immediately and exclusively by the terms upon which they have agreed whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms (Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) NSW Conv R 55-299 at 56,787 and Sinclair Scott and Co v Naughton (1929) 43 CLR 310 at 317). This argument was never put to Rolfe J. The argument his Honour addressed was that the heads of agreement, read with the lease to Kezis and the memorandum referred to in that lease, in so far as they were not inconsistent with the heads of agreement, constituted a binding contract within the second category referred to in Masters v Cameron; see appeal book 324, 329 and 335 where his Honour rejected that argument.

Be that as it may, I am not persuaded that the parties were content to be bound immediately and exclusively by the terms of the heads of agreement which they had signed. In their subsequent letter to the respondent's solicitors on 29 June 1990, with which was enclosed a form of lease, the appellant's solicitors wrote: "The lease is submitted to you for consideration and any necessary discussion and we emphasise that our client company has yet to consider the document and give its approval, and we reserve the right on behalf of our client to make any necessary alterations to accord with its instructions and the heads of agreement."