New South Wales Court of Appeal CITATION : GAMVROGIANNIS & ANOR. v. BLACKSHAW & ANOR. [2002] NSWCA 6 FILE NUMBER(S) : CA 40342/00 HEARING DATE(S) : 18/07/2001 JUDGMENT DATE : 26 February 2002 PARTIES : JAMES GAMVROGIANNIS and TINA GAMVROGIANNIS (Appellants) WILLIAM DUNLEATH BLACKSHAW and RHONDA LYNETTE BLACKSHAW JUDGMENT OF : Powell JA at 1; Stein JA at 58; Giles JA at 61 LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT ED 4768/99 FILE NUMBER(S) : LOWER COURT Macready M JUDICIAL OFFICER : COUNSEL : M.D. Young (Appellants) M.A. Ashurst (Respondents) SOLICITORS : Dibbs Barker Gosling (Appellants) Blackshaw Lindsay (Respondents) CATCHWORDS : CONTRACT - Agreement for lease - Whether concluded - Agreement in general terms of proposed lease - No agreement as to express terms of provisions in fact agreed upon - Execution of formal lease contemplated - No formal lease prepared or executed. - PRINCIPAL AND AGENT - Authority of agent - One of two prospective purchasers of commercial premises discusses grant of fresh lease with one of two tenants of premises - Tenants allege grant of fresh lease agreed to in discussions - No express evidence given by second purchaser as to existence, or otherwise, of first purchaser's authority to act for her in discussions - Whether authority otherwise established D Allen v. Carbone (1975) 132 CLR 528 Austotel Pty. Limited v. Franklins Selfserve Pty. Limited (1989) 16 NSWLR 582 Commonwealth of Australia v. Verwayen (1990) 170 CLR 394 Dockrill v. Cavanagh (1944) 45 SR 78 Godecke v. Kirwan (1973) 129 CLR 629 Kassabian v. Lagonicos; Rawstrom Investments Pty. Limited v. Lagonicos (1992-1994) NSW Conv R 55-690 Leitz Lesholme Stud Pty. Limited v. Robinson [1977] 2 NSWLR 544 CASES CITED: Mackay v. Wilson (1947) 47 SR 315 Manchester Ship Canal Co. v. Manchester Racecourse [1900] 2 Ch 352 Masters v. Cameron (1954) 91 CLR 353 Potter v. Ferguson [1979] 1 NSWLR 365 Ryan v. Thomas 55 Sol Jo 364 Upper Hunter County District Council v. Australian Chilling and Freezing Co. Limited (1968) 118 CLR 429 Walton Stores (Interstate) Limited v. Maher (1987-1988) 164 CLR 387 Woodroffe v. Box (1954) 92 CLR 245 YorkAir Conditioning and Refrigeration (A'Asia) Pty. Limited v. The Commonwealth (1949) 80 CLR 11 DECISION : Appeal dismissed with costs. - 43 -IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA40342/00 POWELL JA STEIN JA GILES JA 26 February 2002 GAMVROGIANNIS & ANOR. v. BLACKSHAW & ANOR. JUDGMENT 1 POWELL JA: The Appellants appeal from the Judgment delivered and Orders made by Master Macready on 14 April 2000, on which day the Master dismissed with costs the proceedings which had been brought by the Appellants seeking (inter alia) a declaration as to the existence of an agreement for lease said to have been entered into between the Respondents as prospective lessors and the Appellants as prospective lessees in November 1996 and an order that the Respondents specifically perform the said agreement for lease. 2 Although the agreement for lease was alleged to have been made in November 1996, it is necessary, in order that one might more readily understand the issues which were debated at trial and on the appeal, to commence the record of the relevant facts at an earlier point of time. 3 The premises the subject of the alleged agreement for lease are premises apparently known as Shop No. 1 on the Ground Floor of a building known as 40-48 Bay Street, Double Bay, which premises are located on the Western side of Bay Street and on the Southern side of Cross Street with which, at that point, Bay Street intersects. Bay Street, Double Bay runs in a Northerly direction from New South Head Road, Double Bay to the waterfront and is a street which contains a number of commercial buildings. Cross Street runs in a South Easterly direction from Ocean Street, Double Bay to New South Head Road and also contains a number of commercial buildings. In 1992 – the relevance of which date will shortly appear – and in 1996, there were two entrances to the lobby of the building – which lobby contained both a lift and stairs to upper floors – one such entry being from the corner of Bay Street and Cross Street and the other entry being from Bay Street. (Blue AB 254) 4 In 1992, the Registered Proprietor of the land upon which was erected the building known as 40-48 Bay Street, Double Bay was a company known as Howard Chia Investments Pty. Limited. At that time, so it would seem, the Appellant, Mr. Gamvrogiannis ("Mr. Gamvros") – or, perhaps, it was the two Appellants – who had previously operated a coffee house known as the "Gentry" in the Tattersalls City Arcade for approximately 10 years, sought to obtain from Howard Chia Investments Pty. Limited, a lease of Shop 1, 40-48 Bay Street, Double Bay, for the purpose of operating a Greek restaurant which came to be known as "Aesops", that lease to be for a term of 5 years with an option to renew for a further term of 5 years. 5 Although the matter is not dealt with expressly in the evidence, it seems tolerably plain that Howard Chia Investments Pty. Limited agreed to grant to the Appellants the lease which was sought and the Appellants were let into possession of the subject premises on or about 1 April 1992. Although the matter is not entirely clear, it would appear that the subject premises had not previously been used for the purposes of a restaurant and that, for that reason, it was agreed between the Appellants and Howard Chia Investments Pty. Limited that the Appellants would have the benefit of what I understand is sometimes called a "rental holiday" for a period in order that they might have an opportunity to establish their proposed business, the "price" for their being granted that indulgence being an obligation thereafter to pay a rental which would be somewhat higher than the appropriate current market rentals (see Blue AB 7). 6 The formal lease (Exhibit A, Blue AB 186-212) which was executed on 14 October 1992, and which provided for a term of 5 years commencing on 1 April 1992 and terminating on 31 March 1997, contained the following (inter alia) provisions: "2. OPTION FOR RENEWAL The Lessor hereby covenants with the Lessee as follows: (1) If not less than six months prior to the Termination Date set out in number 6 of the Lease Schedule the Lessor shall have received from the Lessee written notice of the desire of the Lessee to renew this lease for a further term set out in number 7 of the Lease Schedule and if the Lessee shall have during the term of this lease duly and punctually paid the rent and other amounts payable pursuant to this lease by the Lessee and duly observed and performed all of the covenants and provisions herein contained on the part of the Lessee to be observed or performed, the Lessor shall at the cost of the Lessee grant to the Lessee a lease of the premises upon the covenants and provisions as referred to in paragraph (2) for the further term set out in number 7 of the Lease Schedule commencing from the Termination Date set out in number 6 of the Lease Schedule. (2) The covenants and provisions to be contained in the renewed lease shall be the same as those contained in this lease except for the following: (a) the renewed lease shall not contain any option for renewal and accordingly all of this clause 2 and numbers 7 and 17 of the Lease Schedule to this lease shall be omitted; … (d) the minimum annual rental to be set out in number 9 of the Lease Schedule shall be the greater of: (i) such amount as the Lessor and Lessee agree upon in writing; (ii) such amount calculated in accordance with paragraph (1) set out in number 17 of the Lease Schedule to this lease; and (iii) such amount as equals the highest minimum annual rental payable during the term of this lease. … 5. MINIMUM ANNUAL RENT The Lessee hereby covenants with the Lessor as follows: (1) The Lessee shall pay to the Lessor during the period set out in No. 4 of the Lease Schedule the minimum annual rent." 7 The Lease Schedule referred to in the provisions to which I have just referred contained the following (inter alia) (Blue AB 188-190): "… (i) For the period from the 1st April, 1992 to the 30th November, 1992 the minimum annual rent must be nil. 9 MINIMUM ANNUAL RENT: … (vi) For the period from the 1st April, 1996 to the 31st March, 1997 the minimum annual (sic) must be One hundred and fifty three thousand dollars ($153,000.00) payable calendar monthly in advance in the sum of Twelve thousand seven hundred and fifty dollars ($12,750.00). … 17. RENT IN RENEWED LEASE (1) MINIMUM ANNUAL RENT The minimum annual rent to be inserted herein shall be the higher of: (a) The market rent. The market rent shall be the market rent as agreed between the parties and in default of agreement as calculated in accordance with clause 30 hereof. The market rent must be determined as at the Termination Date set out in item number 6 of the Lease Schedule to this Lease. (b) The highest minimum annual rent payable by the Lessee in any year of the term. (c) The minimum annual rent payable in respect of the immediately preceding year of the Lease increased by ten per centum (10%) per annum." 8 In addition to the provisions to which I have earlier referred, the Lease contained, in what was described as an "Amendments Schedule" the following further provision (Blue AB 209): "15. The following clause 32 shall be and is hereby added to the Lease: 32. Right of First Refusal to take Lease (a) Provided that: (1) If the Lessee has committed a breach of any of the Lessee's covenants, obligations and agreements under this Lease and under any Lease for the term commencing on the 1st April, 1997 and the Lessor has by notice in writing given particulars to the Lessee of the breach and the Lessee has remedied the breach within a reasonable time; and (2) If the Lessee has committed a breach of any of the Lessee's covenants, obligations, agreements under this Lease and under any Lease for the term commencing on the 1st April, 1997 and if the Lessor has waived or excused in writing the breach; and (3) The Lessee has duly exercised its option for the Lease for the term commencing on the 1st April, 1997; and (4) The Lessee serves on the Lessor notice in writing not more than nine months nor less than three months prior to the 1st April, 2002 of the Lessee's desire to take a further Lease; and (5) Neither this Lease nor the Lease for the term commencing on the 1st April, 1997 has been terminated. Then the Lessor must not during the period of the term of this Lease or the term of the Lease commencing on the 1st April, 1997 (or during any holding over by the Lessee) grant to any person other than the Lessee (except with the written consent of the Lessee) a Lease of the whole or any part of the premises unless and until the Lessor has offered to the Lessee in writing on the same terms and conditions a lease of the whole or part of the premises as has been offered to any other proposed Lessee a Lease of the whole or part of the premises. If the Lessee has failed to accept the offer made to it by the Lessor within 14 days of the Lessor's written offer being served upon the Lessee and/or has failed to enter into a binding Lease within 14 days of the written offer being served upon the Lessee made to it then the Lessor shall be free to Lease the whole of the premises or any part of the premises to another party on the same terms and conditions or on no less advantageous terms to the Lessor than those on which the premises were first offered to the Lessee. (b) This Right of First refusal to Take a Lease must bind the Lessor assigns and all successors in title." 9 In his Affidavit Mr. Gamvros said (Blue AB 5) that, in about mid-September 1996, he was informed by Mr. Rowland Banks of Rowland Banks Real Estate Pty. Limited, which company, if it had not earlier acted for Howard Chia Investments Pty. Limited had apparently been appointed the agent of Mr. A. R. M. MacIntosh, a well known chartered accountant with considerable experience as a Receiver and Manager and as a Liquidator of companies, that Mr. MacIntosh had been appointed as Receiver and Manager of Howard Chia Investments Pty. Limited. At that time, so Mr. Gamvros said, he was aware that, if the option to renew contained in the Lease were to be exercised, it needed to be exercised in writing but, so he has said, he did not know to whom, if anyone, he should give written notice in order to protect the position of his wife and himself. Mr. Gamvros' assertion is, if I may say so, more than a little odd since, quite apart from the provisions of s.170 of the Conveyancing Act 1919 itself, clause 23 of the Lease (Blue AB 201) expressly provided that any notice or other document to be delivered, given or served pursuant to the Lease might be delivered, given or served in any manner mentioned in s.170 of the Conveyancing Act 1919, it following that it was open to the Appellants to give notice by forwarding it by post to Howard Chia Investments Pty. Limited at its registered office at 18-26 Dixon Avenue, Artarmon, a fact of which Mr. Gamvros would readily have been informed if he had consulted his solicitors. Quite apart from this, however, it should not go unremarked that subsequent events would seem to demonstrate that Mr. Gamvros did not wish to exercise the option contained in the Lease but, rather, wished to obtain a fresh Lease which provided for a rental which would be significantly lower than that which would be payable if the option to renew were exercised. 10 Be all this as it may, in his Affidavit Mr. Gamvros said (Blue AB 5) that he had a conversation with Mr. MacIntosh, which conversation was to the following effect: Gamvros: "What's the situation with my lease? Do I have a lease?" MacIntosh: "There's no problem with your lease." Gamvros: "It's time to exercise the option for a new lease. What should I do?" MacIntosh: "I can't answer that at this stage as we are negotiating with a new buyer." I must say that I find this alleged conversation to be a little curious not merely because of the matters to which I referred in the immediately preceding paragraph but also because Mr. MacIntosh' experience over the years with Photo Art & Sound (Cremorne) Pty. Limited and its principal Mr. Lobel ( Photo Art & Sound (Cremorne) Pty. Limited v. Cremorne Centre Pty. Limited Powell J, 11 November 1983; Court of Appeal 5 September 1984; Powell J 6 December 1984; Court of Appeal 10 June 1987; ; MacIntosh v. Lobel (1993) 30 NSWLR 441 ) would have provided Mr. MacIntosh with a more than passing acquaintance with the law insofar as it relates to the manner of exercise of options to renew which are contained in leases. 11 In his Affidavit, Mr. Gamvros continued (Blue AB 5): "Because of my confusion about the situation over our lease, my uncertainty about who any notice of exercise of option should be addressed to and the time taken over the above enquiries, the time for giving written notice had expired before I confirmed in writing our desire for a further term. Annexed and marked "A" is a copy of a letter I sent to Mr. McIntosh (sic) dated 3 October 1996." That letter was in the following terms (Blue AB 17): "Further to our recent meeting, I would like to express my desire to exercise the option for renewal on the above property or alternatively, negotiate a new lease with you or the new owner with the following conditions: 1) a minimum 5 year lease period with a further 5 year option. 2) the rent payable be a reasonable market rent . 3) the lease/option confirms to the Retail Tenancy Act. Looking forward to your early reply." It is, in my view, clear – and the contrary was not argued – that this letter did not constitute an effective exercise of the option to renew contained in the lease for, except in those cases – and this is not one – to which the provisions of s.133E of the Conveyancing Act 1919 apply, a lessee who wishes to exercise a conditional option for renewal must comply strictly with the conditions – as, for example, the time within which a notice of exercise must be given – to the fulfilment of which the exercise of the option of renewal is made subject ( Gilbert J McCaul (Aust.) Pty. Limited v. Pitt Club Limited (1957) 59 SR 122 ). 12 Subsequent events make it tolerably plain that the "new buyer" of whom, so Mr. Gamvros has said, Mr. McIntosh had spoken in his conversation with him, were the Respondents, of whom Mr. Blackshaw was then a solicitor of many years experience and either a partner in, or consultant to, the firm of Blackshaw Lindsay & Le Page, which firm had its offices at 36A Bay Street, Double Bay. 13 On 10 October 1996, Mr. Banks wrote to Mr. Gamvros a letter which, so far as is relevant, was as follows (Blue AB 18): "In view of the fact that your option to renew your lease was not exercised on or before the due date, the purchaser of the property (with whom we must consult before taking any action regarding tenancies) is not prepared to renegotiate your lease at this stage. I suggest you wait until closer to the end of your lease term and reassess the situation then." 14 On 15 October 1996, Mr. Gamvros wrote to Michael Magowan Real Estate, which firm, so Mr. Gamvros has said, he had heard had been appointed the new managing agents for the property, and which firm had its offices at 36A Bay Street, Double Bay, a letter which referred to the letter of 10 October 1996 which had been written by Mr. Banks, in which letter Mr. Gamvros wrote (inter alia) as follows (Blue AB 19): "In respect to not exercising my option by the due date, a letter was sent to the receiver Mr. Macintosh (sic), after our recent meeting at Aesops, regarding this matter. I suggest that you obtain a copy for your records. Further, it is not prudent nor desirable to the continued progress of my establishment to wait until "closer to end of my lease term to renegotiate a new lease". Aesops has filled a niche market for larger group bookings for occasions such as hen's (sic) parties, corporate functions, etc., bookings often made months in advance. I must be assured of secure tenure to meet my obligations to these patrons and to continue with the ongoing flow of future bookings. Additionally, I would need to notify my established customer base, well in advance, of any change in venue. If your client is not prepared to begin immediate negotiations to finalise a new lease, I will have no alternative but to relocate to premises which will guarantee secure tenure immediately upon the termination of this current lease. As you may already know, I have met all my committments (sic) under the current lease, and indeed was the first tenant of this building. I have enjoyed a good working relationship with the previous owner and had hoped that this would continue with the new owner. However, unles (sic) I have misunderstood your letter, the new owner or you as their agent feel I am not a desirable tenant. I would obviously like this matter clarified as soon as possible and request that a copy of this letter be forwarded to the new owners." 15 On 24 October 1996, Mr. Blackshaw wrote to Mr. Gamvros in the following terms (Blue AB 170): "I wish to advise that my wife and I are the purchasers of the property occupied by you. We have been given a copy of your letter dated 15 October 1996 which seems to fairly state your position. Perhaps you and I might meet to discuss the matter at a time convenient to yourself. … P.S. I am free most mornings." Despite the fact that this letter both gave Mr. Blackshaw's address as being 36A Bay Street, Double Bay and gave a telephone number, Mr. Gamvros appears to have made no effort either to telephone Mr. Blackshaw or even to walk the short distance up the street to see him. On the contrary, it would appear that the meeting which he was to have with Mr. Blackshaw on 15 November 1996 was arranged by Mr. Michael Magowan. 16 This is all very curious given what Mr. Gamvros had written in his letter of 15 October 1996 and given that, in his Affidavit, Mr. Gamvros deposed (inter alia) (Blue AB 6): "9. By the time of that meeting I was very concerned about securing our tenancy of the Premises or seeking alternative premises before the initial lease expired on 31 March 1997. If we had to move, I wanted the transition to be as smooth and uninterrupted as possible. 10. I had been negotiating with Mr. Anthony Murrell, the agent for commercial premises at 24 Bay Street, Double Bay which had been empty for a substantial period and would have been suitable for our business as it was (and had approval for) a licenced (sic) restaurant. In the event that I was unable at the meeting with the defendant on 15 November 1996 to negotiate a renewal of our lease, it was my intention to pursue a lease of the premises at 24 Bay Street." Despite the reference to "a renewal of our lease", it is quite clear, in my view, that what Mr. Gamvros sought to do was, not to obtain a renewal of the lease, but to obtain the grant of a fresh lease upon terms which, at least in some respects – and, in particular, in relation to the rent payable – differed from the terms of the lease to which the Appellants would have been entitled if the option to renew had been validly exercised. 17 In his Affidavit (Blue AB 6-8) Mr. Gamvros said that, at his meeting with Mr. Blackshaw on 15 November 1996, the copy of the lease which had been granted to the Appellants by Howard Chia Investments Pty. Limited was placed on the table at which he and Mr. Blackshaw were sitting. He then recorded a conversation which was to the following effect: Gamvros: "Bill, I would like to finalise the new lease today, as I have many advanced bookings which I have to honour. Also, I do not want to jeopardise the continued trading of my business." Blackshaw: "I understand that, I know you are a good tenant. We should be able to finalise everything today." Gamvros: "I'm happy with my situation here. I've enjoyed a good working relationship with the previous landlord and I hope this will continue with you." Blackshaw: "I see no problem there." Gamvros: "Okay. Bill the terms of the current lease I'm okay with except for the current rent lease schedule regarding the rent of $12,750. The rent I've been paying in these last 12 months is well above current market rental due to the arrangement made with the previous landlord. It was agreed that I pay a lower rent at the beginning, giving me time to establish myself and then a much higher rent in the later periods. I've checked with several agents in the Double Bay area and have been told that a reasonable market rent for these premises would be closer to $10,000 to $10,500 per month." Blackshaw: "I was considering more than that, closer to $11,000 or $11,500." Gamvros: "I really don't want to leave these Premises. I'm prepared to pay no more than $11,000 per month initially, with annual CPI increases." Blackshaw: "I'm not satisfied with CPI increases, but will agree to 5% annual increases." Gamvros: "That's quite high, given CPI currently is well below that, but I guess that it won't stay that low for too long. Okay, I'm happy with that. So that's $11,000 per month with 5% per annum increase for five years. Okay, that's fine. I still want first refusal for another five years as mentioned in the lease, that should see me through to retirement I hope." Blackshaw: "I don't see a problem with that." Gamvros: "I'm glad that's over. I can plan more confidently now – and my wife will be happy, she's a bit of a worrier. She hates not knowing what's going to happen." and then, after they had shaken hands: Gamvros: "That's good. $11,000 a month, 5% annual increase for 5 years and right of first refusal for another 5 years. When will you have the lease ready?" Blackshaw: "I'll confirm all this in writing and ask my son David to prepare the lease." Gamvros: "Thanks Bill. I look forward to hearing from him. I'm really glad that its all finalised." 18 Despite Mr. Gamvros" version of the conversation, other matters were discussed at that time as the letter written by Mr. Blackshaw on 18 November 1996 (Blue AB 20-21) makes clear. That letter was as follows: "Re: New Lease of your premises Re: W.D.B. Nominees Pty. Limited I refer to our discussion on Friday afternoon and confirm the following arrangement: 1. On expiration of the current lease and subject to completion of the purchase of the building, we will grant you a new lease for a term of 5 years. 2. The rent for the new term will be $132,000 per annum payable at the rate of $11,000 per calendar month. 3. The lease shall be subject to an annual increase of 5% per annum during the term. 4. Stamp duty and legal costs will be disclosed in the lease and shall be payable by the tenant. 5. The owners intend to lodge a plan with Woollahra Council so that a new entrance to the lift will be created in Cross Street next to the present garage entry. The existing entry to the lift will then be converted to shop space. Subject to Council approval, the existing entry area will be allocated to the two existing ground floor tenants. Following the allocation an adjustment in rent will be made based on any variation in the area occupied by each tenant. In order to carry out this work, the present loading dock may be incorporated in the new entrance area leading to the lift. This projected change in the layout was discussed at our meeting and I am sure it will not cause any inconvenience. Of course the cost of all work will be met by the owners. 6. Your offer to remove all rubbish from the garage of the building is appreciated and in the interest of good relations with other tenants, the sooner this is done the better. 7. Your request for an area to be set aside for storage is noted and we will be happy to discuss this with you in due course. 8. My son, David Blackshaw, a partner in Blackshaw Lindsay & le Page, solicitors, of 36A Bay Bay (sic) Street, Double Bay, will prepare the agreement to lease shortly. Mr. Michael Magowan of Michael Magowan Real Estate will look after rent collection. The lease document will be delivered to you shortly so that you can obtain advice from your own solicitor before signing same. Please advise if you have any queries." 19 The conversation which is said to have taken place between Mr. Gamvros and Mr. Blackshaw and the terms of Mr. Blackshaw's letter invite a number of comments: 1. given the term of the lease which was sought by Mr. Gamvros, it was essential, if that estate were to vest in the Appellants at law, that there be executed a form of lease in registrable form, which form of lease was thereafter registered (Real Property Act 1900 ss. 41, 53); 2. it is clear that, at that time, the parties contemplated that such a form of lease would be prepared and executed; 3. it seems equally clear that, at that time, both Mr. Gamvros and Mr. Blackshaw were accustomed to utilise the services of solicitors; 4. the last paragraph of Mr. Blackshaw's letter would indicate that he proposed that the form of lease to be prepared would be prepared by his son and that, when that had been done, it would be presented to Mr. Gamvros so that he might obtain legal advice as to its terms and that, if he were advised that it was satisfactory, he and his wife would execute it; 5. it seems equally clear that the only terms of the proposed lease which were agreed upon were, first, that it be for a term of 5 years; second, that the rental for the first year would be $11,000.00 per month and that there be annual increases of 5% in each of the succeeding 4 years; and, third, that there should be "a right of first refusal for another 5 years"; 6. unless, therefore, it could be said that what had been agreed upon constituted all those matters which were essential for finality and completeness and that the lease which was to be prepared could not contain any new terms for the modification of those already discussed, it could not be said that there was a concluded agreement to grant a lease for 5 years with a right of first refusal for a further 5 years ( Masters v. Cameron (1954) 91 CLR 353 ; Godecke v. Kirwan (1973) 129 CLR 629 Allen v. Carbone (1975) 132 CLR 528 ). If, however, it could be said that it was not open to whosoever was to draft the form of lease to vary or add to what had been agreed upon then, in the absence of any form of lease having been prepared, it would be open to the Court in any proceeding seeking specific performance of the agreement to have an appropriate form of lease settled in the Court ( Niesmann v. Collingridge (1921) 29 CLR 177 ). 7. As I have noted, Mr. Gamvros claims, not that what was agreed upon was an option to renew the proposed lease for a further period of 5 years, but "a right of first refusal for a further period of 5 years", the terms upon which that right of first refusal were to be accorded to him not being the subject of any agreement. This is a matter of some importance, for the phrase "right of first refusal" is not a technical term and is capable of a variety of meanings, although, in the absence of any context suggesting the contrary it prima facie connotes, not a present offer, but rather a negative obligation requiring the covenantor to refrain from dealing with the subject matter, the opportunity of acquiring the subject matter in preference to any other ( Mackay v. Wilson (1947) 47 SR 315 ; Woodroffe v. Box (1954) 92 CLR 245 ; Potter v. Ferguson [1979] 1 NSWLR 365 ). As Street J (as he then was) said in Mackay v. Wilson supra at 325 : "But an agreement to give "the first refusal" or "a right of pre-emption" confers no immediate right upon the prospective purchaser. It imposes a negative obligation on the possible vendor requiring him to refrain from selling the land to any other person without giving to the holder of the right of first refusal the opportunity of purchasing in preference to any other buyer. It is not an offer and in itself it imposes no obligation on the owner of the land to sell the same. He may do so or not as he wishes. But if he does decide to sell, then the holder of the right of first refusal has the right to receive the first offer, which he also may accept or not as he wishes. The right is merely contractual and no equitable interest in the land is created by the agreement." 8. the fact that the lease which had been granted by Howard Chia Investments Pty. Limited to the Appellants contained the "right of first refusal to take lease" which I have earlier set out (para. 8 (above)) does not, as it seems to me, assist in determining what were intended to be the terms of the contemplated "right of first refusal", for the terms contained in the then existing lease would have been quite inappropriate for such a right in the proposed lease, if only because the right contained in the existing lease was conditioned (inter alia) upon the original lease not having been terminated and the Appellants having exercised their option to renew; 9. even if what is said to have been agreed to on 15 November 1996 could be regarded as a concluded agreement to grant a lease, of which agreement Mr. Blackshaw's letter of 18 November could be regarded as a sufficient not or memorandum for the purposes of s.54A of the Conveyancing Act 1919, then, until such time as a formal lease were executed and registered, the Appellants, by remaining in occupation and paying the rent agreed upon, were but tenants whose tenancy was determinable at the will of either of the parties by one month's notice in writing expiring at any time ( Conveyancing Act 1919 s. 127(1); Dockrill v. Cavanagh (1944) 45 SR 78 ; Leitz Leeholme Stud Pty. Limited v. Robinson [1977] 2 NSWLR 544 ); 10. if, however, what was agreed upon on 15 November 1990 cannot be said to have been a concluded agreement for lease then, by virtue of the provisions of clause 3 – the "holding over" clause (Blue AB 191) – of the lease, the Appellants continued in occupation as monthly tenants only their tenancy being terminable by one month's notice in writing given by either party to the other expiring at any time. 20 In his Affidavit (Blue AB 8) Mr. Gamvros said that, following his meeting with Mr. Blackshaw, he did not pursue negotiations for a lease of the alternative premises which he had been considering, as he believed that he and his wife had an agreement with Mr. Blackshaw "for a lease for a further 5 years as well as the right of first refusal in respect of a further term and that a lease would be sent to (him and his wife) for signing". 21 No such lease had been prepared or forwarded to Mr. Gamvros by the time the original lease expired on 31 March 1997. 22 Notwithstanding the expiry of the original lease and the fact that no form of lease had been forwarded to Mr. Gamvros, Mr. Gamvros and his wife continued in occupation of the subject premises. Although, until the expiration of the original lease, they continued to pay rent at the rate of $12,750.00 per month, as from 1 April 1997 they commenced to pay rent at the rate of $11,000.00 per month and, notwithstanding what was said to have been agreed upon on 15 November 1996, continued to do so up to and including April 1999. 23 Although the matter is not entirely clear, it would seem that the fact that Mr. and Mrs. Gamvros commenced to pay a lesser amount of rent than previously led to a query being raised by one of the members of the staff of Michael Magowan Real Estate for, on 15 May 1997, Mr. Gamvros forwarded by facsimile to Michael Magowan Real Estate, for the attention of "Michelle", a letter reading as follows (Blue AB 22): "Further to our telephone conversation today, I enclose a letter from Bill Blackshaw outlining the arrangements regarding our lease. The previous lease terminated on the 31/3/97, therefore the new rent as of the 1/4/97 is now $11,000.00 not $12,750.00. Also, as I have already mentioned to Michael, we do not require any parking spaces in the building so could you also please stop sending me an account for parking in the building." (The enclosed letter was a copy of Mr. Blackshaw's letter of 18 November 1996). 24 On 17 September 1997, Michael Magowan Real Estate wrote to Mr. Gamvros a letter which was as follows (Blue AB 25-26): " RE: WHOLE GROUND FLOOR 40-48 BAY STREET DOUBLE BAY The Development Application has been lodged by the architect Cedric Carle which will provide a new rear entrance to the lift, however, council has not yet approved this amendment. We expect a discission (sic) within the next month. We confirm however that we have accepted your option to renew your current five (5) year lease. We will also grant you a lease of the adjoining shop when the work to complete the new rear entrance has been carried out. The lease of the new shop will be for a term expiring at the conclusion of your present lease (the option term) so that both leases are in sync. We estimate that the area of the re-configured shop will be approximately 191 sqm (142.5 sqm – your existing shop plus 48.5 sqm – the new area) and the all up costs of the new work is estimated to be in the vicinity of $200,000. It is difficult at this stage to estimate future rents, however, we feel that the rent for the new shop will be in the vicinity of $1,200 per week. We also accept your offer to pay half of the cost of a new awning and will discuss the type of awning in due course. Your comments in due course." (This letter appears to have been drafted by Mr. Blackshaw (Black AB 25-26, Exhibit H, Blue AB 180). Despite the reference to the acceptance of the option to renew the current 5 year lease, what I have earlier recorded will make it clear that the option to renew had never been validly exercised.) 25 On 15 October 1997, Mr. Gamvros wrote to Michael Magowan Real Estate a letter which, so far as is relevant, was as follows (Blue AB 27): "Thank you for your letter dated 17th September 1997 and I apologise for the delay in this reply. I acknowledge your comments regarding renewal of my lease option and the granting of an additional lease for the new shop (which you are prepared to lease to me on completion of the building amendments). After speaking to my solicitor, I find the proposed arrangements unnecessarily complicated i.e. different leases for two shops. As the object of the exercise is to incorporate the new area as part of the existing premises, I cannot understand the necessity for having separate leases. As you are aware the original lease terminated on 31 March 1997. The option for renewal, although requested and agreed upon has still not been delivered for signature, even after several requests. In view of the new area becoming available in the foreseeable future, I respectfully request that the status quo remain (i.e. no option renewal be prepared) and a new lease be prepared based on the entire new area available of approximately 191 sqm. Given my history as the original tenant of this building and my desire to continue trading in these premises, there is no risk involved on your part to delay the signing of a new lease until all building work is finished and the total area is available. At the end of the day this will simplify things greatly and make for a happier tenant and a better long term relationship. In regards to the estimated future rental for the new area of $1200 per week, I find this, with respect, ridiculously expensive. Based on my current rental that works out to be a 50% increase. I would consider a rental closer to the amount currently being paid on the existing premises. … " 26 Although development approval to the proposed alterations to the subject property appears to have been given by Woollahra Municipal Council in late October 1997, that approval was not thereafter acted upon. 27 In his Affidavit (Blue AB 11) Mr. Gamvros said that in or about April 1998 he had a conversation with a Mr. Bradshaw, an employee of Michael Magowan Real Estate, which conversation was to the following effect: Gamvros: "The first 12 months of the lease is about to expire and we are due for an increase in rent. Where is my lease, Landon? Should I start paying the increased rent now?" Bradshaw: "Don't pay the increase until we contact you. I'll get on to it." 28 As I have earlier recorded, Mr. and Mrs. Gamvros continued to pay rental at the rate of $11,000.00 per month until April 1999 without any complaint on the part of Michael Magowan Real Estate or Mr. Blackshaw. 29 According to Mr. Gamvros he continued to ask for a lease to be prepared and made available, but that was never done. 30 On 20 April 1999 Michael McGowan Real Estate wrote to Mr. Gamvros a letter in the following terms (Blue AB 31). " Ref: Rent Increase Shop: 2/40-48 Bay Street Double Bay NSW 2028 We refer to W.D. Blackshaw's letter dated 18.11.96 (copy enclosed). We confirm that your rent should have risen to $11,550.00 p.c.m. ($11,000 + 5%) on 1.4.98 and again to $12,127.50 p.c.m. ($11,000 + 5% + 5%) on 1.4.99. Consequently would you now please pay $6,600.00 back rent from 1.4.98 to 1.4.99, plus $577.50 back rent from 1.4.99 to 1.5.99. Would you now please pay rent at the rate of $12,127.50 until 1.4.2000." 31 Despite the terms of that letter, Mr. Gamvros says that, following its receipt, he asked Mr. Magowan whether the 5% increase applied to the base year or on a compound basis and that he made a similar inquiry of Mr. Blackshaw who said that it was on a compound basis. This is all very curious as Mr. Gamvros also says that, after he had received the letter, he asked Mr. Magowan whether he could pay the arrears by instalments over the next few months, to which request Mr. Magowan agreed. Nor is the matter rendered any less curious by the letter written by Mr. Magowan to Mr. Gamvros on 28 July 1999 which letter was in the following terms (Blue AB 32): " Ref: Shop: 1 40-48 Bay Street Double Bay NSW 2028 You advised me that the terms of the earlier offer contained in Mr. Blackshaw's letter were incorrect in that you did not feel that the suggested annual increments of 5% p.a. should apply and that rather the 5% should apply only to the original years (sic) rent. Further to that I have discovered an error in the rent calculation I will address this shortly." In his Affidavit (Blue AB 14) Mr. Gamvros said: "I know of no "advice" from me as referred to in the first sentence of that letter, unless that be a reference to my inquiry about whether the rental increase was compound." 32 On 29 July 1999 Michael Magowan Real Estate wrote again to Mr. Gamvros a letter which commenced (Blue AB 33): " Re: Your Tenancy Since returning from holidays I have checked your rental position and it appears an error has been made. In your letter of 15 May 1997 (copy attached) you noted that the new rent would be $11,000. This figure was accepted as being correct but perusal of clause 9 in the lease schedule indicates that the correct rent is $153,000.00 i.e. $12,750.00 per calendar month. A copy of clauses 9 and 17 of the lease schedule are attached. Clause 17 is also embodied in clause 2 of the lease under "Option for Renewal". The 'greater amount' is accordingly $153,000 and this is the commencing rental from 1.4.1997 and is payable at the rate of $12,750 per calendar month." Then, following the calculations which purport to record arrears of $106,183 the letter concluded: "Future rent is therefore $16,970.00 per calendar month from 1.8.99. We would appreciate your cheque for the arrears within 14 days." 33 Thereafter, following an exchange of letters between the parties" solicitors, Mr. and Mrs. Gamvros' solicitors on 1 October 1999 forwarded to Blackshaw Lindsay by facsimile a letter which was as follows (Blue AB 38): "GAMVROGIANNIS - BLACKSHAW We refer to prior correspondence and to your letter of 15 September. Without answering in detail all the matters raised in your letter of 15 September, we dispute that no existing agreement for lease exists and that our clients are holding over as tenants on a month to month basis. In the circumstances, unless your clients submit for execution and registration a lease consistent with the agreement between the parties within 7 days, we are instructed to institute proceedings for appropriate relief, without further notice." 34 The proceedings appear to have been commenced at some time thereafter in 1999, but only as against Mr. Blackshaw. 35 When the proceedings came on for hearing before the Master on 15 March 2000 the proceedings were amended by joining Mrs. Blackshaw as an additional party-Defendant. In the Amended Summons (RAB 1) which was filed by leave on that day, Mr. and Mrs. Gamvros claimed the following (inter alia) relief (RAB 1): "1. A declaration that the agreement for a lease of the premises being Shop 1 on the ground floor, ground floor male and female toilets and cleaners (sic) room at 40-44 (sic) Bay Street, Double Bay (part of land in Folio Identifier A/338045) between the first defendant and the second defendant as lessors and the plaintiffs as lessees, upon the terms and covenants set out in the letter from the first defendant to the first plaintiff of 18 November 1996 and otherwise upon such terms and covenants applicable to the option for renewal contained in RPA Lease E843172 as do not conflict with those in the said letter, should be specifically performed and carried into execution. 2. (In the alternative to 1 above) a declaration that the agreement for a lease to the effect set out in 1 above which the first defendant and second defendant are estopped from denying, should be specifically performed and carried into execution." 36 Only three extracts from the oral evidence given on the hearing need be recorded here. 37 In the course of his cross-examination, Mr. Gamvros gave the following evidence (Black AB 6): "Q. What I am suggesting to you is that at the meeting of 15 November 1996 Mr. Blackshaw was talking about what he was likely to do after he became the registered proprietor of the property. Do you agree with that? A. Yes. Q. And one of the things that he said he was likely to do after he became the registered proprietor of the property was to have his son draft a lease and send you a copy of that lease. Do you agree with that? A. Yes. Q. And he said to you, did he not, that you should have that draft lease looked at, obtain your solicitor's advice about the proposed lease? A. That's what he said in that letter, yes. Q. And that is what you intended doing, was it not? A. Yes." 38 In the course of his cross-examination Mr. Blackshaw gave the following evidence (Black AB 19): "Q. I think, reverting to the totality of the documents produced, all of the letters, in terms of letters about buying the property, leasing the property, re-developing the property, mortgaging the property are written by you and you alone and not your wife? A. Yes. Q. Do I take it from that those areas such as the purchase of properties, the leasing of properties and the re-developing of properties, it is you who day – to – day run things on behalf of yourself and your wife? A. Correct. Q. When you give instructions, do you do it on behalf of the pair of you? A. Yes." and later (Black AB 20), after a reference to his letter of 24 October 1996: "Q. And you wrote that letter suggesting the meeting in response to, as you understood it, Mr. Gamvros's desire to clarify arrangements about the lease and its future? A. Yes. Q. And I take it that letter was written on behalf of you and your wife? A. Yes. Q. And indeed you went to the meeting that took place on 15 November representing not only yourself but also your wife? A. Yes. Q. And similarly when you retained the firm of Michael McGowan (sic) Real Estate as managing agents, they were retained on behalf of you and your wife? A. Yes." 39 In the course of his re-examination, Mr. Blackshaw gave the following evidence (Black AB 30-31): "Q. You were asked about the fact that you undertook, on behalf of your wife, the day-to-day running of the business? A. Yes. Q. It was suggested to you that on behalf of your wife you negotiated various terms to such things as proposed sale of land agreement and mortgages. Do you recall that? A. Yes, I do. Q. In addition to negotiating terms for proposed sale of land, have you ever entered into a sale of land on behalf of your wife? A. Have I ever - Q. Entered into a sale of land agreement on behalf of your wife as distinct from negotiating some terms of a proposed sale of land agreement? A. I would negotiate for my wife but then she would sign the final document Q. In respect of mortgages would you negotiate the terms of those mortgages on behalf of your wife? A. Yes. Q. To your recollection, did you ever enter into a mortgage on behalf of your wife? A. I've done negotiations and she has then signed the mortgage document. Q. In respect of leases, have you negotiated the terms of leases on behalf of your wife? A. I have negotiated on her behalf. Q. And then have you, to your recollection, ever entered into a lease agreement on behalf of your wife or has she entered – A. She has signed the documents after the negotiations were complete." 40 Although, as a reference to the Master's Judgment makes clear, a greater number of questions was debated on the hearing, in the end, as it seems to me, the questions with which the Master considered that he was required to deal were three, they being: 1. whether, assuming that Mr. Blackshaw was authorised to act on behalf Mrs. Blackshaw, and that Mr. Gamvros was authorised to act on behalf of Mrs. Gamvros, the discussion between Mr. Gamvros and Mr. Blackshaw on 15 November 1996 resulted in a concluded agreement by which the parties intended then to be contractually bound; 2. whether it had been established that Mr. Blackshaw was authorised to act on behalf of Mrs. Blackshaw and Mr. Gamvros was authorised to act on behalf of Mrs. Gamvros at the meeting on 15 November 1996; and 3. whether, in the event that it be held that the discussion between Mr. Blackshaw and Mr. Gamvros on 15 November 1996 did not constitute a concluded agreement by which the parties intended then to be contractually bound, Mr. and Mrs. Blackshaw were estopped from denying that such an agreement had been concluded. 41 In the course of his Judgment, the Master, after recording Mr. Gamvros' version of the discussion with Mr. Blackshaw continued (RAB 9-10): "5. There is reference in the conversations I have quoted above to a right of first refusal. The lease as well as having an option did have a right of first refusal for further leasing. The first defendant conceded that the conversation occurred at least in part in the terms set out above. There was an issue between the first plaintiff and the first defendant as to whether or not the renewal included the right of first refusal. According to the first defendant this was not said by the first plaintiff. However, that is not of great moment because the plaintiff (sic) places its (sic) case upon the fact that it was the existing lease which was before the parties during the discussion which was the subject of the further agreement. The first defendant was familiar with the terms of the lease prior to the meeting. As that document contained the right of first refusal to lease it would be included in any event notwithstanding what was said about that matter expressly in the conversation." 42 Later in his Judgment, after recording what he considered to be the principles to be applied in determining whether or not there was an agreement between the parties for the granting of a lease, the Master continued (inter alia) (RAB 18-24): "13. I turn to the facts in the matter and in particular as to whether the parties have reached agreement on all areas. 14. The first of these in respect of which it was submitted that there was no agreement was the area of the land to be demised. This arises because of paragraph 5 in the first defendant's letter of 18 November 1996. This aspect was not referred to in the first plaintiff's account of the conversations on 15 November and was the subject of cross-examination. The first plaintiff agreed that he did discuss the matters dealt with in paragraph 5 during the course of the meeting. The first plaintiff understood that it was proposed to make a new entrance way and says that there was no agreement as to what were to be the boundary changes. The first plaintiff did not consider himself bound to accept any such changes when they were proposed in the future by the first defendant. In other words the boundary change was a matter for discussion and further agreement. Given that Council approval was necessary this is not surprising as, indeed, no approval may be given. The term was not an 'essential' term in the sense that the contract would not be complete without it. As was pointed out in Australian Broadcasting Corporation v. XIVth Commonwealth Games Limited it is not necessary for the parties to agree on all matters to make a concluded bargain. … 15. This seems to me to be an area where the parties had not reached agreement on a minor matter but did not wish it to hold up a concluded agreement. 16. It was suggested that there was no agreement as to the rent to be paid. This is based upon the assumption that there was to be a variation in the area leased as referred to in 1 above. It thus does not affect the matter. 17. It was suggested that there was no agreement on the ancillary covenants to the lease. The conversation which I have set out above concerning the discussions on 15th clearly has the plaintiff talking about the terms of the current lease and him being happy with those terms except for the rent. In the context of that statement one would infer that the parties were intending to incorporate the existing detailed terms of the then lease which was extant between the parties. … 18. It would seem to me that the parties are agreed on the terms of the incidental covenants being those in the existing lease and I do not regard the reference to stamp duty in the letter of 17 September as anyway detracting from such a conclusion. The amount of stamp duty and costs no doubt would have been the subject of discussion or concern to a lessee. 19. I return to the more central question of whether the parties intended to make a concluded bargain in their discussion on 15 November 1996. The discussion as recounted certainly had the necessary indicia of a final agreement. The commencing words were, 'Bill, I would like to finalise the new lease' followed by an advancement of relevant reasons as to why certainty was required. The response to the opening statement also included 'finalise everything today'. The conclusion of the conversation also refers to the matter being finalised with reference to the first plaintiff being glad that certainty had been achieved. There is no reference in the discussions to the plaintiff having the lease checked by solicitors. The only reference was that the first defendant said he would get his son to prepare the lease. 20. The letter of 18 November 1996 talks of an arrangement. I see no difference in terms of terminology because of the fact that the word 'agreement' was not used. An arrangement can include an arrangement under which the parties have agreed to be contractually bound. The particular numbered paragraph 1 is quite straightforward and clearly indicates an intention to grant a new lease from the time certain which (sic). The last sentence of the letter does, of course, refer to the plaintiff obtaining advice from a solicitor and it is not unnatural given the letter was written by the first defendant, himself a solicitor, that he should take this precaution. … 25. Bearing in mind these matters and in particular the correspondence it seems to me that the parties reached a concluded agreement on 15 November 1996. I am mindful of the fact that the lease was to be registered and solicitors were involved. However, the very terms of the conversation outweighs these factors and there had been a previous lease under which the plaintiff's had operated for many years." 43 When he came to deal with the question of Mr. Blackshaw's authority to bind Mrs. Blackshaw, the Master wrote (RAB 26-27): "31. I turn to the question of the authority of the first defendant to act on behalf of the second defendant. In a number of cases courts have referred to the fact that a solicitor has authority to negotiate on behalf of his client as to the terms upon which a contract will be entered into but no authority by virtue of their retainer to enter into such a contract or an agreement for lease. … The first defendant was a solicitor and as such may arguably have had the authority a solicitor would have had when dealing with a matter on behalf of himself and his wife. In any event there was specific evidence given by Mr. Blackshaw in cross-examination concerning the purchase of properties, leasing and mortgaging by both of them. He conceded that he did the day to day running of things on behalf of himself and his wife and gave instructions on behalf of both of them. He conceded that the letter of 18 November was written on behalf of both of them and he conceded he went to the meeting on 15 November representing not only himself but also his wife. Re-examination made it plain, however, in relation to sales of properties, mortgages over properties and leasing that although he negotiated terms on behalf of himself and his wife, his wife always executed the relevant contract, mortgage or lease. In these circumstances it would seem there is no authority for him to reach a concluded agreement on behalf of his wife in respect of the agreement to lease. 32. In the absence of this authority to conclude the final agreement on behalf of the second defendant there can, in fact, be no concluded final agreement as a result of the meeting of 5 November 1996. Accordingly the plaintiffs' claim fails". 44 In dealing with the question of estoppel the Master said (RAB 25): "The other was the claim based on estoppel. The difficulty with this claim is that there does not seem to be any relevant evidence of detriment suffered by the plaintiffs. The only suggestion of detriment was that prior to the meeting of 15 November the first plaintiff looked around for other premises and came across one at 24 Bay Street. The premises apparently were slightly larger and the rental was less than his existing premises. He says that as a result of the meeting of 15 November he did not take up that offer. Instead, what has happened is that the plaintiff (sic) has continued in occupation at the rental agreed upon which was less than his (sic) expired lease. In the event that he is unsuccessful he will need to move to other premises and any detriment he suffers as a result of the first defendant now resiling from his promise would be the costs of and losses suffered as a result of a move to new premises. There is absolutely no evidence to suggest that this will involve him in expense by way of increased rental or some other such matter. In particular, the evidence which he gave would suggest that it might have the opposite effect. In these circumstances it would seem that there is no evidence of detriment and such a claim can not succeed." 45 In the event, as I have earlier recorded, the Master dismissed the proceedings, but without determining the nature of any estate in the property which Mr. and Mrs. Gamvros might have had. 46 Although a number of confused grounds of appeal were taken in the Notice of Appeal filed on behalf of Mr. and Mrs. Gamvros (RAB 30-31), in reality they can be reduced to two, they being: 1. having, so it was said, correctly determined that the parties reached a concluded agreement on 15 November 1996 for a new lease of the premises for a term of 5 years from 1 April 1997, the Master erred in the holding that the agreement was vitiated by Mr. Blackshaw's lack of authority to bind Mrs. Blackshaw; and 2. alternatively, the Master erred in relation to the question of estoppel in holding that there was no evidence of detriment suffered or to be suffered by Mr. and Mrs. Gamvros and that accordingly that claim could not succeed. 47 In a Notice of Contention filed on their behalf, Mr. and Mrs. Blackshaw contended that the Master's decision should be affirmed upon the ground that, having regard to the evidence, the Master should have found that no concluded agreement for a new lease had been reached on 15 November 1996. 48 It seems to me that the first question which falls for consideration is whether or not, on the assumption that each of Mr. Blackshaw and Mr. Gamvros had the authority to bind his wife, the conversation which took place on 15 November 1996 led to an agreement by which the parties then agreed to be contractually bound, or whether what was discussed led only to a limited consensus as to the subject matter and some, but not all, of the important terms to be included in the proposed lease. 49 At the outset of one's consideration of that question, one encounters a difficulty in that, in his Judgment, the Master makes no express finding as to the terms of the conversation which occurred on 15 November 1996, as to the terms of which conversation it is clear from paragraph 5 of the Master's Judgment that there was some dispute as to whether or not Mr. Gamvros had sought, and Mr. Blackshaw had agreed, that the proposed lease would contain a right of first refusal which, so Mr. Gamvros" version of the discussion makes clear, Mr. Gamvros considered to be a matter of some importance. I am, however, prepared to proceed upon the basis that Mr. Gamvros" version of the discussion correctly records what occurred at that meeting. 50 Notwithstanding that I am prepared to proceed upon that basis, it is my view, in contrast to that expressed by the Master, that the conversation which occurred on 15 November 1996 did not lead to a concluded agreement which was intended by the parties then to be contractually binding upon them. I take that view for two reasons, they being: 1. upon analysis, the parties had not agreed upon the terms of an important provision of the proposed lease, that is, the right of first refusal; and 2. upon analysis, the case was one in which the intention of the parties was not to reach a concluded agreement unless and until they executed a formal lease. 51 It is no answer to the first of these matters to say, as the Master has done (see paras. 5 and 17 of his Judgment), that, whether or not there was any express discussion as to a right of first refusal, the form of lease to be entered into would incorporate a right of first refusal in the terms contained in the existing lease. On the contrary, as I have earlier pointed out, the phrase "right of first refusal" is not a technical term and is capable of a variety of meanings, it following that, even if the conversation on 15 November 1996 had been in the exact terms alleged by Mr. Gamvros, he and Mr. Blackshaw had not agreed upon the meaning to be attributed to the phrase "right of first refusal" and, thus, that there had been no agreement upon what was intended to be an important term of the lease to be executed. Nor is it any answer to this to say, as the Master, relying upon the decision of McLelland CJ in EQ in Kassabian v. Lagonicos; Rawstron Investments Pty. Limited v. Lagonicos & Ors. (1992-1994) NSW Conv R 55-690, said, that, given Mr. Gamvros statement that "the terms of the current lease I'm okay with" one would infer that the parties were intending to incorporate the existing detailed terms of the existing lease, for, if clause 32 of the existing lease were to be included in the new lease, it would have no room to operate as Mr. Gamvros and his wife had not, as was accepted, exercised the option to renew contained in the existing lease. If, therefore, Mr. Gamvros and his wife were to have a right of first refusal in the new lease, the terms of that right would need to be the subject of agreement. 52 In paragraph 19 of his Judgment, the Master when discussing the question whether the parties intended to make a concluded bargain in their discussion on 15 November 1996 wrote (inter alia): "There is no reference in the discussions to the plaintiff having the leased checked by solicitors. The only reference was that the first defendant said he would get his son to prepare the lease." a statement which overlooks that part of Mr. Gamvros" cross-examination which I have earlier (para. 37 (above)) set out in which Mr. Gamvros assented to the proposition, first, that Mr. Blackshaw told him (Mr. Gamvros) that he (Mr. Blackshaw) would have his son draft a lease and send Mr. Gamvros a copy; second, that Mr. Blackshaw told Mr. Gamvros that he (Mr. Gamvros) should have the draft lease looked at and obtain his solicitor's advice about it; and, third, that Mr. Gamvros intended to obtain his solicitor's advice about the proposed lease. Given that the proposed lease related to commercial premises, the rent of which would be substantial, and given that the term of the proposed lease was such that, if it were to be vested in law in Mr. and Mrs. Gamvros, the lease would need to be registered, this evidence, in my view, indicated that the parties did not on 15 November 1996 intend then to be contractually bound, but, rather, intended that they should not become contractually bound and unless and until a formal lease the detailed terms of which were agreed upon, had been prepared and executed then exchanged. 53 As the parties did not, on 15 November 1996, intend that they should then be contractually bound, it follows that, in continuing in possession of the subject premises after 1 April 1997 and paying the rents which had been agreed upon on 15 November 1996, Mr. and Mrs. Gamvros, either by virtue of the provisions of clause 3(1) of the lease – the holding over clause - or of the provisions of s.127 of the Conveyancing Act 1919 became and remained monthly tenants, their tenancy being terminable by one month's notice in writing given on either side expiring at any time, it following that Mr. and Mrs. Gamvros failed to make out their claim for the relief which they had sought. 54 Although that conclusion makes it unnecessary that I express a view on the other two questions considered by the Master, I indicate my views, albeit but briefly. 55 If, as did the Master, I had concluded that Mr. Gamvros and Mr. Blackshaw, on 15 November 1996 intended that the parties should then be contractually bound, I would have held that, even if Mr. Blackshaw did not have his wife's express authority to conclude an agreement, either he had her ostensible authority or his actions ought to be regarded as having been ratified by the fact that the rent which had been agreed upon was sought and received, by Mr. Blackshaw and his wife after 1 April 1997. 56 My conclusion that Mr. Gamvros and Mr. Blackshaw did not on 15 November 1996, intend that the parties then be contractually bound would lead me to conclude, albeit for different reasons from those expressed by the Master, that there is no room in the present case for the operation of the doctrine of "estoppel" upon which Mr. and Mrs. Gamvros sought to rely. Underlying the doctrine of "estoppel" as expounded by the High Court in Waltons Stores (Interstate) Limited v. Maher (1987-1988) 164 CLR 387 and The Commonwealth of Australia v. Verwayen (1990) 170 CLR 394 is the notion of unconscionable conduct, which unconscionable conduct gives rise to an equity which the Court will enforce in whatever manner is necessary to protect the other party from the detriment to which he would otherwise be exposed as the result of that unconscionable conduct. If, therefore, Mr. Gamvros and Mr. Blackshaw did not, on 15 November 1996, intend that the parties should then be contractually bound, each side reserving the right to withdraw at any time until the formal lease had been executed then, in my view, the stand taken by Mr. Blackshaw and his wife cannot be regarded as having been unconscionable. 57 In my view the appeal should be dismissed with costs. 58 STEIN JA: I have had the benefit of reading in draft the judgments of Powell JA and Giles JA. I agree with their separate conclusion that the parties had not reached a complete agreement. Assuming that the parties agreed that the new lease contain the right of first refusal in the first lease, that could not be taken up in the new lease because, as Giles JA points out, it would make no sense and be ineffective. Further agreement was necessary and this did not occur. An essential provision was therefore uncertain and the arrangement reached between the parties must fail. 59 I also agree with what Powell JA has said regarding the authority of Mr Blackshaw regarding his wife. 60 The appeal should be dismissed with costs. 61 GILES JA: I have had the advantage of reading the judgment of Powell JA in draft. Drawing upon what his Honour has said, I can briefly explain why I agree with the orders he proposes. Facts 62 The appellants held a five year lease of the premises at 40-48 Bay Street, Double Bay, terminating on 31 March 1997. The lease included an option for renewal, by which there could be the grant of a lease for a further five years from 31 March 1997 on the same terms as the existing lease, save for the option for renewal, at a rent to be agreed or ascertained in a stated manner. The lease also included a right of first refusal, by which during the term of the original lease or the renewed lease and any holding over period the lessor could not lease the premises to any other person without first offering a lease to the lessee on the terms offered to the other person. 63 The appellants did not exercise the option for renewal. Mr Gamvrogiannis wished to negotiate a new lease. On 15 November 1996 he met Mr Blackshaw, who together with his wife was shortly to become the lessor. 64 Although it was disputed in one respect, I will assume in favour of the appellants that the meeting included a conversation as recalled by Mr Gamvrogiannis and set out in the reasons of Powell JA. The meeting went beyond that conversation, in that there was also discussion of a proposed alteration to the building containing the premises and consequent adjustment in the rented area and the rent. I will also assume in favour of the appellants that Mr Blackshaw acted with the authority of his wife. 65 A copy of the existing lease was taken to the meeting by Mr Gamvrogiannis, and was placed on the table at which he and Mr Blackshaw were sitting. Mr Gamvrogiannis said that he would "like to finalise the new lease today", and Mr Blackshaw said that they "should be able to finalise everything today". 66 Mr Gamvrogiannis said that "the terms of the current lease I'm okay with except for the current rent schedule regarding the rent of $12,750". There was haggling over rent, and agreement on $11,000 per month with 5 per cent annual increases. 67 Mr Gamvrogiannis summarised the agreement on rent and said, "Okay, that's fine. I still want first refusal for another five years as mentioned in the lease, that should see me through to retirement I hope". Mr Blackshaw said that he didn't see a problem with that. Mr Gamvrogiannis said that he was "glad that's over" and that he could now plan more confidently, and referred to his wife now being free from worry about what was going to happen. 68 Mr Gamvrogiannis and Mr Blackshaw shook hands. Mr Gamvrogiannis gave a further summary, saying "That's good. $11,000 a month, 5% annual increase, for five years and right of first refusal for another five years". He asked, "When will you have the lease ready?" Mr Blackshaw said, "I'll confirm all this in writing and ask my son David to prepare the lease". Mr Gamvrogiannis said that he looked forward to hearing from Mr Blackshaw's son and "I'm really glad that it's all finalised". 69 Mr Blackshaw then sent to Mr Gamvrogiannis a letter dated 18 November 1996 purporting to confirm the "arrangement" made at the meeting. The letter is set out in the reasons of Powell JA. It referred to the grant of "a new lease for a term of 5 years", and to rent of $11,000 per month subject to 5% annual increases. It said nothing about an option for renewal or a right of first refusal. It did not say that the new lease would be on the terms of the existing lease, or indeed anything about the detailed terms of the new lease. It said that Mr Blackshaw's son "will prepare the agreement to lease shortly", and that it would be delivered to Mr Gamvrogiannis "so that you can obtain advice from your own solicitor before signing same". The appellants' claims in the proceedings 70 The appellants claimed in the alternative - (a) that there had come into being an agreement for lease of the premises - " … upon the terms and covenants set out in the letter from [Mr Blackshaw] to [Mr Gamvrogiannis] of 18 November 1996 and otherwise upon such terms and covenants applicable to the option for renewal contained in [the existing lease] as do not conflict with those in the said letter"; (b) that the respondents were estopped from denying that there had come into being an agreement for lease of the premises to the effect set out in (a). They sought specific performance of the actual or estoppel agreement. 71 The description of the agreement was not entirely satisfactory, since it left unclear what were the "terms and covenants set out" in the letter of 18 November 1996. However, it became clear that the appellants' position was that the new lease was to be for the term of 5 years and at the rent of $11,000 per month stated in the letter, and otherwise on the terms and conditions of the lease which would have resulted from exercise of the option for renewal in the existing lease. This is important, because the terms and conditions of the lease which would have resulted from the exercise of the option for renewal in the existing lease did not include the option for renewal but included the right of first refusal. 72 In the conversation on 15 November 1996 Mr Gamvrogiannis twice referred to a right of first refusal, on the first occasion "first refusal … as mentioned in the lease". He referred to a right of first refusal "for another five years". The right of first refusal in the existing lease did not last for five years after the expiry of the term, nor was the lease which might be offered to the lessee necessarily a five year lease. Only in the sense that during the five year term of the new lease the lessor could not lease the premises to any other person without first offering a lease to the lessee on the terms offered to the other person would the right of first refusal be for another five years. Further, an option for renewal rather than a right of first refusal would have better served Mr Gamvrogianis' apparent wish to have a lease of the premises until retirement. 73 It might be speculated that Mr Gamvrogiannis really meant an option for renewal as mentioned in the lease. However, Mr Gamvrogiannis was familiar with an option for renewal and did not use those words, and it was not suggested in the appeal that he was referring to the option for renewal. The speculation must be suppressed, and the appeal must be dealt with on the basis put forward, that he meant the right of first refusal and that the actual or estoppel agreement included a right of first refusal in the terms of the right of first refusal in the existing lease. An actual agreement? 74 At the end of the meeting Mr Gamvrogiannis and Mr Blackshaw may have believed that they had agreed upon a new lease, a lease for five years at a rent of $11,000 per month subject to 5% annual increases and taking up the terms of the existing lease except for the option for renewal. Nonetheless, they did not have a complete agreement. 75 It is plain from Mr Gamvrogiannis' account of the conversation that the right of first refusal was an essential part of the new lease. So it was an essential part of the agreement for lease for which the appellants contended. Since on the appellants' case it was in the terms of the right of first refusal in the existing lease, any question of a new lease with the content of the right of first refusal supplied by the incidents attached in law to the phrase does not arise. (I express no view on whether any content could be supplied, and if it could what content: see Manchester Ship Canal Co v Manchester Racecourse Co (1900) 2 Ch 352; Ryan v Thomas 55 Sol Jo 364; Woodroffe v Box (1954) 92 CLR 245; Potter v Ferguson (1979) 1 NSWLR 364.) 76 Probably neither of Mr Gamvrogiannis and Mr Blackshaw recalled how the right of first refusal was expressed in the existing lease. It read - "32 Right of First Refusal to take Lease (a) Provided that: (1) If the Lessee has committed a breach of any of the Lessee's covenants, obligations and agreements under this Lease and under any Lease for the term commencing on the 1st April, 1997 and the Lessor has by notice in writing given particulars to the Lessee of the breach and the Lessee has remedied the breach within a reasonable time; and (2) If the Lessee has committed a breach of any of the Lessee's covenants, obligations, agreements under this Lease and under any Lease for the term commencing on the 1st April, 1997 and if the Lessor has waived or excused in writing the breach; and (3) The Lessee has duly exercised its option for the Lease for the term commencing on the 1st April, 1997; and (4) The Lessee serves on the Lessor notice in writing not more than nine months nor less than three months prior to the 1st April, 2002 of the Lessee's desire to take a further Lease; and (5) Neither this Lease nor the Lease for the term commencing on the 1st April, 1997 has been terminated. Then the Lessor must not during the period of the term of this Lease or the term of the Lease commencing on the 1st April, 1997 (or during any holding over by the Lessee) grant to any person other than the Lessee (except with the written consent of the Lessee) a Lease of the whole or any part of the premises and until the Lessor has offered to the Lessee in writing on the same terms and conditions a lease of the whole or part of the premises as has been offered to any other proposed Lessee a Lease of the whole or part of the premises. If the Lessee has failed to accept the offer made to it by the Lessor within 14 days of the Lessor's written offer being served upon the Lessee and/or has failed to enter into a binding Lease within 14 days of the written offer being served upon the Lessee made to it then the Lessor shall be free to Lease the whole of the premises or any part of the premises to another party on the same terms and conditions or on no less advantageous terms to the Lessor than those on which the premises were first offered to the Lessee. (b) This Right of First refusal to Take a Lease must bind the Lessor assigns and all successors in title." 77 Even as part of the existing lease the right of first refusal was curiously framed and badly written, but its operation is tolerably clear. Only if the option for renewal had been exercised and notice of desire to take a still further lease had been given was the lessor obliged first to offer to lease the premises to the lessee. The lessor was bound during the term of the lease, any renewal pursuant to the option for renewal and any holding over, but from the statement of the preconditions it is apparent that it addressed only the grant of a lease for a term after the expiry of a renewal pursuant to the option for renewal. The effect of the preconditions was that the lessee's opportunity to have a further term after 31 March 1997 came from the option for renewal, not from the right of first refusal, and that the right of first refusal gave the opportunity to have a further term after 31 March 2002 but only following on the term resulting from the exercise of the option for renewal. 78 The right of first refusal in the existing lease could not simply be taken up the new lease. Its terms would not make sense, and could not be made to make sense by adjusting dates, because the new lease did not have any option for renewal. Thus what Mr Gamvrogiannis and Mr Blackshaw may have believed was a complete agreement was not a complete agreement. The essential right of first refusal was defective, and further agreement was necessary. 79 Interpretation as envisaged in York Air Conditioning and Refrigeration (A'Asia) Pty Ltd v The Commonwealth (1949) 80 CLR 11 and Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 can not overcome the defect. There was to be a right of first refusal, the right of first refusal was to be in the terms of the existing lease, but on going to the existing lease those terms would make no sense in the new lease. The court can not substitute some other expression of the right of first refusal. 80 It can not be said that there was a complete agreement in that Mr Gamvrogiannis and Mr Blackshaw were agreed upon the terms of the right of first refusal, although the terms did not make sense in the new lease. An agreement to lease at a rent to be agreed is incomplete even if "at a rent to be agreed" is there in black and white. If an essential provision is uncertain, the whole agreement falls. An estoppel agreement? 81 This alternative does not assist the appellants. Any estoppel would only preclude the respondents from denying the existence of something which was not a complete agreement: see Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 584, 602, 617. It may be that principles of estoppel would have entitled the appellants to some other relief sufficient to remedy unconscionability, but not the relief they claimed. The result 82 Although not for the reason given by the Master, the appellants' claims fail. The appeal should be dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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