MITAKOS v KLIDES SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P, HANDLEY and STEIN JJA 6 August 1997 Lease — Oral Agreement — Conveyancing Act 1919, S 54a — Specific Performance The appellant and the respondent entered into an oral agreement for the lease of a shop. A memorandum containing some of the terms was signed by the appellant. Later a dispute arose about the terms of the formal lease. The respondent rescinded and sued for damages. The appellant cross-claimed for damages for the wrongful repudiation of the agreement. The trial judge found for the respondent. HELD: dismissing the appeal: (1) The judge's findings as to the terms of the oral agreement for lease could not be disturbed; (2) Neither party had pleaded that the oral agreement was unenforceable because there was no sufficient memorandum of the contract to satisfy s 54 A of the Conveyancing Act, and the appellant had not contended at the trial that the oral agreement was subject to contract. Had either point been raised at the trial the proceedings might have been conducted differently. It was too late for the appellant to raise either point for the first time on appeal. Conveyancing Act 1919, s 54A considered FAI Insurance Co Ltd v Concord Personnel Management Services Pty Ltd (1987) 87 NSW Conv R 55, considered. Mason P. I will ask Justice Handley to give the first judgment. Handley JA. This appeal arises out of an oral agreement for a lease entered into between the appellant as landlord and the respondents as intending tenants on or about 31 August 1988. A memorandum of the terms of that agreement was brought into existence on 31 August and signed by the appellant but not by the respondents. In November 1989 disputes arose prior to the execution of a formal lease and the intending tenants regarded themselves as entitled to rescind. They sued for damages for breach of the oral agreement. The defendant filed a defence admitting the existence of a contract but denying the existence of a term entitling the tenants to an option of a 3 year renewal. He also filed a cross-claim alleging wrongful repudiation of the agreement claiming damages of $100,000. In the notice of appeal the appellant seeks judgment for $85,189.25 damages. The essential issue at the trial was whether the oral agreement contained a term entitling the tenants to an option for a three year renewal. This term was not included in the written memorandum, but it was silent as to the term of the lease in any event. It was common ground that this was 3 years. When the solicitors for the landlord delivered a draft lease to the tenants, the latter objected on two grounds: firstly, to the omission of what they claimed was the agreed term providing for the 3 year option of renewal and, secondly, on the ground that the provisions for the commencement of the term and rental payments were not consistent with the memorandum. The appellant refused to amend the draft lease and, according to the intending tenants, told them that they could, 'Take it or leave it'. The tenants treated this as a repudiation and rescinded. 2 UNREPORTED JUDGMENTS The trial judge found that the oral agreement did contain a term that the tenants had a 3 year option of renewal. He referred to a number of matters which he thought supported the tenants" case on the probabilities. He found the demeanour of the witnesses who gave evidence on this issue of little assistance and he made it clear that he did not regard any witness as having attempted to give false evidence. In the end his Honour preferred the evidence of the plaintiffs and their witnesses on this issue to that of the defendant. Mr Stewart for the appellant sought to displace the judge's findings and to bring the appeal within the exceptions to the Abalos principle. He sought to gain comfort from the fact that the trial judge had not relied on the demeanour of any of the witnesses, but such a disclaimer does not open up these findings of fact to appellate review because the subtle influence of demeanour may still have been important. Mr Stewart also relied on other matters. He referred to the tenants" complaints that in addition to the absence of the option, there was disconformity between the terms of the draft lease relating to the commencement of rental payments and the corresponding terms of the memorandum. His submission was that the judge had overlooked this matter, and when one took this into account, his findings of fact were significantly devalued. In my judgment Mr Stewart failed to establish that the relevant provisions of the draft lease were consistent with the corresponding provisions of the memorandum. The draft lease provided for a rental holiday from 13 September 1989 to 17 December 1989 plus 3 weeks thereafter, but the memorandum of agreement provided for a rental holiday of 6 weeks not 3. The difference was not insubstantial. It was submitted that the appropriate finding was that the tenants had changed their minds about the wisdom of the commercial venture, and either seized upon the absence of an option for a 3 year renewal as a pretext to withdraw, or else deliberately gave false evidence to cover their tracks. The second matter is concluded against the appellant by the judge's findings on the honesty of the witnesses and, in particular, his acceptance of the evidence given by the plaintiffs and their witnesses as to the existence of the term providing for a 3 year renewal. Moreover a party's motive for exercising his, her or its contractual rights does not affect or qualify those rights. In my view, therefore, the attempt to displace the judge's findings as to the oral term fails. Mr Stewart also attempted to rely on the fact that the agreement for lease was not enforceable. There is much to be said for this view. However, neither side relied on the absence of a sufficient memorandum to satisfy s 54A of the Conveyancing Act. Neither asserted that the oral arrangement was subject to contract, so that no enforceable agreement came into existence until formal documents were executed and exchanged. Mr Stewart then submitted that the oral term for the option of renewal was void for uncertainty. The judge noted that it was common ground that neither side was entitled to specific performance of the oral agreement for the renewal, referring to FAI Insurance Co Ltd v Concord Personnel Management Services Pty Ltd 87 NSW Conv Rep 55 and Zimin v Wentworth Properties Pty Ltd 59 SR 101. However, while the absence of any right to specific performance seems to have been common ground, neither side seems to have taken the next step of asserting that there was no enforceable agreement at all. Both parties pleaded an enforceable agreement and neither pleaded that there was no enforceable agreement. The point was not taken in the notice of appeal. Had the point been URJ MITAKOS v KLIDES (Mason P) 3 taken at the trial, the conduct of the trial could have been significantly affected. Claims for restitution may have been raised and additional evidence may have been given by either or both of the parties. Such a point cannot be raised for the first time on appeal. For all these reasons I would propose that the appeal should be dismissed with costs. Mason P. I agree. Stein JA. I also agree. Mason P. The orders of the Court will be as proposed by Justice Handley. Appeal dismissed with costs. Counsel for the appellant: C K Stewart Solicitors for the appellant appellant: John Rose & Co Counsel for the respondent: C A Vindin Solicitors for the respondent: Milne Berry & Berger