New South Wales Supreme Court CITATION : The Trustees of the Roman Catholic Church for the Archdiocese of Sydney v TGP Architects & Planners [2005] NSWSC 381 HEARING DATE(S) : 18-20/4/05 JUDGMENT DATE : 20 April 2005 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : No agreement for lease exists. Order for possession of land made. CATCHWORDS : CHURCHES AND RELIGIOUS ASSOCIATIONS - constitution, management and powers - procedures in Roman Catholic Church Archdiocese of Sydney for entering a commercial lease - scope of authority of parish priest concerning entering of commercial lease - CHURCHES AND RELIGIOUS ASSOCIATIONS - church property and trusts - role of the statutory corporation which holds church real estate - CONTRACTS - PARTICULAR PARTIES - principal and agent - whether solicitor engaged by Roman Catholic priest to draw up a commercial lease has actual or ostensible authority to act for the corporation which holds church real property - LANDLORD AND TENNANT - termination of the tenancy - factors relevant to time allowed before execution of order for possession LEGISLATION CITED : Roman Catholic Church Trust Property Act 1936 CASES CITED : Magripilis v Baird [1926] QSR 89 The Trustees of the Roman Catholic Church for the Archdiocese of Sydney - Plaintiff PARTIES : TGP Architects & Planners Pty Ltd - Defendant FILE NUMBER(S) : SC 7000/04 G Lindsay SC; G W McGrath - Plaintiff COUNSEL : S Epstein SC; M Seymour - Defendant Corrs Chambers Westgarth - Plaintiff SOLICITORS : Baron & Associates - Defendant LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CAMPBELL J WEDNESDAY 20 APRIL 2005 7000/04 THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY v TGP ARCHITECTS & PLANNERS PTY LIMITED JUDGMENT – Ex Tempore (Revised 21 April 2005) 1 HIS HONOUR: This litigation relates to whether an enforceable agreement to lease exists. The Factual Background to the Dispute 2 At the corner of Broadway and Abercrombie Street in Chippendale is a parcel of land on which is erected St Benedict's Roman Catholic Church and various other buildings, including one which was formerly a boys' school. The registered proprietor of that land is the plaintiff in these proceedings, the Trustees of the Roman Catholic Church for the Archdiocese of Sydney ("the Trustees"). That body is established as a body corporate under the provisions of section 4 of the Roman Catholic Church Trust Property Act 1936 ("the Trust Property Act"). The particular premises to which this dispute relates is a part of the building which used to be the boys' school. 3 The parish priest at St Benedict's, for many years, has been Father Purcell. 4 The defendant is a company which is the vehicle by which a professional practice of architects is carried on. It has occupied a part of the first floor of the building since 1995. Other tenants occupied other parts of the building. The defendant first entered into possession of its part of the building in around August of 1995. A lease dated 2 November 1995 was executed, which made provision for a term of two years beginning on 1 August 1995. 5 There have been two short-term leases executed by the plaintiff and the defendant since then. There was a lease for two years from 1 March 1998, and another for two years from 1 May 2001. 6 In relation to all the leases which have reached the stage of written documentation the lessor is stated to be "The Trustees of the Roman Catholic Church for the Archdiocese of Sydney". However, the practice for payment of rent has been that an invoice would be sent to the defendant on the letterhead of "Catholic Parish of St Benedict", payment was made to an officer of the parish, and a receipt was issued on a printed form headed "St Benedict's Catholic Church", signed by someone who was stated on the face of the receipt to be "for Parish Priest". The "Catholic Parish of St Benedict" has its own Australian Business Number. Negotiations for a New Lease Begin 7 In the beginning of 2003 the lease which the defendant then had over the premises was due to come to an end on 30 April 2003. In January 2003 negotiations started between the defendant and Father Purcell for a further term. 8 The defendant in all negotiations was represented by Mr McGuirk. 9 There was some correspondence between Father Purcell and the defendant, beginning from March 2003, in which various proposals were put one by the other concerning the basis upon which a lease might be entered into. There was some difference of opinion about what the rent should be, and the precise form of car parking arrangements which there should be. Those differences of opinion had not been resolved, even in principle, by the time the lease expired. 10 Father Purcell had, in March of 2003, proposed that a new term should start on 1 October 2003. On 1 October the defendants began paying rent at a higher rate then they had previously done, and by that time some new car parking arrangements, of a kind which had been discussed between Mr McGuirk and Father Purcell were in place. A new lease document had not, however, been executed. 11 In late 2003 or early 2004 Mr McGuirk became aware that the University of Notre Dame was doing a feasibility study concerning the St Benedict's site. He provided the University with plans of the entire building, including the floor which the defendant occupied. 12 On 18 February 2004 Father Purcell wrote to the defendant saying: "I wish to inform you that draft leases have been forwarded today to the parish Solicitors, Robert Lloyd and Company 18 York Street Sydney. When they are typed, they will forward them to you for checking and signature and then to me for checking and signature and subsequent forwarding to the Archbishop. If there is any mistake which you notice, please advise me." 13 In the past the procedure which had been involved when a new lease was entered into between the Trustees and the defendant was that the commercial terms of it would be worked out between Father Purcell and the defendant, Father Purcell would instruct the parish's solicitors, Lloyd & Lloyd, to draw up a lease, that lease would be sent to the defendant for execution, and after execution by the defendant it would be sent to the Archbishop, and then to the Trustees for their execution. At no time in the past had the Archbishop or Trustees demurred in any way to the commercial arrangements which had been arrived at between Father Purcell and the defendant. Mr McGuirk had the impression that the Trustees just rubber-stamped the arrangement that he had worked out with Father Purcell. Relevant Provisions of Canon Law 14 The authority of Father Purcell to deal with real property which, in a colloquial sense, belongs to the Church needs to be examined taking into account the provisions of Canon Law on that topic. While Canon Law is a matter of the internal law of the Church, the actual authority of a priest is a matter affected by the internal law of the Church. 15 Under Canon Law a parish is recognised as having a separate legal personality, as a "public juridical person", to which property can belong. A priest has authority to administer what Canon Law refers to as the "temporal goods" belonging to that parish - which means, in broad terms, what a lawyer in the civil law would call "items of property" including real property. The authority of the parish priest is such that he cannot be dictated to by those in the hierarchy above him about what he should do concerning the temporal goods connected with his parish. Only the parish priest has authority to make such decisions. 16 An expert in Canon Law, Dr Austin, has explained that the role of the Trustees is to safeguard, in the civil law, property which in Canon Law belongs to each parish, and property of the Archdiocese itself. The role of the Trustees is not to make decisions but to execute in the civil law the decisions already made by the parish priest who, in accordance with the norms of Canon Law has the authority to do so. 17 However the authority of the parish priest is not unlimited. The parish priest himself is obliged to observe the norms of Canon Law concerning dealing with temporal goods. 18 There is a distinction in Canon Law between "acts of ordinary administration" and "acts of extraordinary administration". Canon 1281 paragraph 2 of the Code of Canon Law promulgated on 25 January 1983, requires each Diocesan Bishop, after consulting the Diocesan Finance Committee, to determine for parishes: "what acts go beyond the limits and manner of ordinary administration". 19 On 30 November 2001 the Archbishop of Sydney issued a Decree, to take effect on 1 January 2002, which defined "acts of extraordinary administration". Those acts of extraordinary administration included "any alienation of property", and "any commercial lease of premises". Those two items had also been in the definition of "acts of extraordinary administration" contained in the previous Decree. There was nothing in the Decree which made receipt of the rent pursuant to a commercial lease an act of extraordinary administration. 20 Canon 1281 paragraph 1 provides that administrators act invalidly if they: "… go beyond the limits and manner of ordinary administration, unless they have first received in writing from the Ordinary, the faculty to do so". 21 So far as St Benedict's was concerned, the Ordinary was the Archbishop of Sydney, Cardinal Pell. It follows that under Canon Law Father Purcell had authority to enter a commercial lease of property at St Benedicts only if he had the approval of the Archbishop, expressed in writing, and with whatever other attributes (if any) might be required under Canon Law to count as a "faculty". Once such a lease was entered, Father Purcell was authorised, under Canon Law, to receive the rent payable under it. Ownership of Church Real Estate in Civil Law 22 The position in civil law is somewhat different. It does not recognise a parish as having any separate legal personality. Indeed, it does not recognise a church, or parish, as having any separate legal personality. Rather, churches and parishes are voluntary unincorporated associations in the eyes of the civil law. To facilitate the administration of the property held for the purposes of these unincorporated associations, the Parliament has passed statutes, for many of the Christian denominations, establishing trustees to hold real property. The Trust Property Act is one such statute. 23 Section 3 of the Trust Property Act provides: "There shall be for each diocese trustees of Church property, who shall be the Bishop of the Diocese and the Diocesan Consultors of the diocese". People come to hold office as Bishop or as Diocesan Consultor, through the internal procedures of the Church. Sections 3 and 4 of the Trust Property Act then confer on them powers and functions for the purpose of the civil law. 24 Because the plaintiff is the registered proprietor of the land on which St Benedicts and its associated buildings is constructed, it is only the Trustees who have the power to grant a lease valid in law. The present case, however, concerns whether there is an agreement which is binding in equity. Such an agreement would need to be between the Trustees and the defendant. 25 Lloyd & Lloyd were at no time, over the years the defendant has occupied the premises, directly instructed by the Trustees to act in connection with the lease of the premises. The instructions to Lloyd & Lloyd came from Father Purcell. Obviously, however, the Trustees were aware, from time to time, of the role which Lloyd & Lloyd had played in the leasing of the premises over the years. The Alleged Agreement for Lease 26 Returning to the sequence of events, on 10 March 2004 Father Purcell instructed Lloyd & Lloyd to prepare a lease which was a lease for three years with an option of a further three years. He had previously given instructions to Lloyd & Lloyd to prepare a lease which was a lease for two years plus two years. Such a two plus two lease was prepared, and Lloyd & Lloyd wrote to the defendant on 4 March 2004 a letter saying: " re: Lease from The Trustees of the Roman Catholic Church for the Archdiocese of Sydney. We act for the Landlord in respect of this Lease and we are enclosing the Lease in duplicate for approval and if approved, for signature by the Tenant. After signature please return both copies of the Lease to us so that we can arrange for signature by the Trustees and attend to stamping. We will let you have a copy of the stamped and signed lease for your records in due course. We are attaching memo of our fees and disbursements and we should be pleased to hear from you. " 27 The memorandum for fees and disbursements was for a total of $631.45, inclusive of the amount of stamp duty which would be payable on the lease. 28 On 18 March 2004, after receiving the instruction from Father Purcell some days earlier, Lloyd & Lloyd wrote to the defendant. The heading was as before. The letter said: "I have now received instructions from Father Purcell that the Church has agreed to grant a three year lease with a three year option. I therefore return the lease which has the amended first page and I should be pleased if you would initial this as indicated." It went on to deal with some other mechanical matters about execution. 29 On 22 March 2004 the defendant wrote to Lloyd & Lloyd saying: "I refer to your letter of March,18 2004 and return lease which we have signed under seal together with our cheque for $631.45." The cheque enclosed in that letter was promptly banked into the office account of Lloyd & Lloyd. The Archbishop Refuses Approval 30 On 2 April 2004 a staff member of the defendant conducted the Cardinal and representatives of the University of Notre Dame around the property. A contemporaneous diary note of the defendant records the Cardinal as saying that the University of Notre Dame: "Would spend 20 million on the property and would have to deal sympathetically with the present tenants as they want the whole property." 31 On 18 April 2004 Father Purcell wrote to Cardinal Pell, sending the executed lease for signature, with a request that it be returned after signature by the Trustees. 32 The administration of property affairs connected with the Archdiocese of Sydney is assisted by a business manager, Mr Casey, and a property manager, Mr Sewell. Mr Casey, in his role, has responsibility for temporal goods administration within the Archdiocese. That includes responsibility for review and analysis of proposals by parishes to, amongst other things, lease property. Mr Sewell is responsible for administering a portfolio of properties owned by the Church. 33 The letter of 18 April provoked a very prompt reaction from Mr Casey. He contacted Mr McGuirk as soon as he received it, and told him that the Church was not in a position to grant a new lease. 34 Mr McGuirk gives evidence, which I accept, that in his conversation with Mr Casey, Mr McGuirk said: "We know they [which means the University of Notre Dame] have been looking at the place but there has been no indication that they are going to take it up. If we can't get a new lease, we want to make sure we get as much notice as we can." 35 The Cardinal then wrote to Father Purcell, on 27 April 2004, saying no lease was to be granted. 36 The Trustees is a body which holds meetings, of which minutes are kept. However, the proposal for a lease to the defendant in 2004 was never put to the Trustees, because a precondition for the Trustees executing the lease, namely that the Archbishop approve it, was not satisfied. Events Between Refusal of Consent and Start of Litigation 37 Mr Casey asked Mr Sewell to contact Mr McGuirk in mid-May 2004 to see if he could help the defendant to find alternative accommodation. Mr Sewell talked to Mr McGuirk about some alternative properties that the Church might be able to offer to the defendant, and showed him one at Glebe. Mr McGuirk told Mr Sewell soon after that he was not interested in the Glebe property and was considering somewhere else. In June 2004, Mr Sewell offered a property at Arncliffe, but this was not suitable either. 38 On 1 August 2004 the Prime Minister, the Federal Minister for Education, the Cardinal, and the Vice-Chancellor of the University of Notre Dame were at a function at St Benedict's, at which there was a public announcement of the establishment of a campus of the University at St Benedict's. The Prime Minister announced it was to begin enrolling students from 2006, and would receive significant public funding. 39 On 16 August 2004 Mr McGuirk sent a fax to the Catholic Archdiocese, marked for the attention of Mr Sewell, which set out his account of the way that the dealings concerning the possible lease had gone. He said that moving would be very expensive, and sought compensation. He asked also for clarification concerning the "vacating details including a firm date for TGP's departure." 40 Mr Sewell subsequently telephoned Mr McGuirk. There is some dispute about whether the conversation took place on the 16th or the 18th of August, but that is completely inconsequential. In the course of that conversation Mr Sewell asked Mr McGuirk what he was seeking from this letter. The conversation continued: McGUIRK: "Formal notice to vacate the premises would be helpful." SEWELL: "How much notice would you need to vacate the premises?" McGUIRK: "1 November would be OK with me." 41 Soon after that conversation, Mr McGuirk rang Mr Sewell again. He said that the defendant needed until the end of the year, and 1 November was too early. Mr Sewell replied by saying that the "end of the year is fine". 42 There was, it seems, no mention of compensation in those particular telephone conversations. However, on 23 August Mr McGuirk phoned Mr Sewell, and asked to arrange a meeting. 43 Around that time the defendant consulted a solicitor. On 26 August 2004 the solicitor for the defendant wrote to Mr Sewell, enclosing a copy of a letter which he wrote that day to Lloyd & Lloyd. The letter to Lloyd & Lloyd requested an executed counterpart of the lease of the premises. The letter to Mr Sewell said that the defendant was concerned as to the way in which the proposal to operate a university and carry out building works might affect "its tenancy". It sought information about that, and continued: "We note that prior to obtaining any legal advice our client was under the misconception that they may be obliged to vacate the premises. That misconception has now been corrected. Accordingly, it is probably unnecessary for any meeting to take place. However we are instructed to accede to any request by the Church to attend a meeting at a time and place that is convenient to all parties." 44 Thereafter, the matter headed slowly towards litigation. On 14 December the defendant lodged a caveat on the title to the land, asserting an equitable interest as a lessee. That caveat has now lapsed, after service of a lapsing notice in January 2005. 45 On 24 December 2004 the defendant was served with a notice to quit. That notice was itself unsigned, but it was served under cover of a signed letter from Corrs Chambers Westgarth Solicitors. Corrs were instructed by Mr Casey or Mr Sewell to send that notice to quit. From their positions in the organisation administering the Church's property in the Archdiocese, both Mr Casey and Mr Sewell had implied actual authority from the Trustees to give that instruction. 46 On 24 December 2004, these proceedings were begun. Is There an Agreement for Lease? 47 The contention of the defendant is that there is an agreement to lease on foot, which arises from an offer made in the letter of 18 March 2004, (para [28] above) which was accepted by the letter of 22 March 2004 (para [29] above). 48 To be able to have that correspondence, in its context, amount to a contract between the defendant and the plaintiff, it is necessary to establish that Lloyd & Lloyd had relevant authority to act on behalf of the plaintiff. Lloyd & Lloyd had, concerning the three previous leases, drawn up a lease purporting to be on behalf of the Trustees, and had sent it to the defendant, and then sent it on to the Trustees for execution, and returned it, when fully executed, to the defendant. The Trustees on each occasion knew, from the time a lease was received by them, what Lloyd & Lloyd had done concerning that lease, raised no objection to Lloyd & Lloyd having done it, and facilitated Lloyd & Lloyd acting to return the executed lease to the defendant. That does not confer any ongoing actual authority to act on behalf of the Trustees concerning negotiation of the terms of leases, or to act at all concerning any lease other than the particular one the Trustees returned to Lloyd & Lloyd. When Lloyd & Lloyd said "We act for the Landlord" in their letter of 4 March 2004, that does not establish that in fact they acted for the Trustees, when the other evidence is taken into account. The Trustees had no knowledge that a negotiation of the alleged March 2004 lease to the defendant was under way, because the proposal for such a lease was never put to the Trustees. The last time the Trustees had been aware that Lloyd & Lloyd were acting concerning a lease to the defendants, was around May 2001. Further, insofar as a decision needed to be made about whether to enter a commercial lease on terms which had been negotiated by a parish priest, that decision was one to be made by the Archbishop, in his role as Ordinary, not by the corporate body (of which the Archbishop was a member) called the Trustees. 49 It was submitted that the present is a situation where the Trustees have accredited Lloyd & Lloyd as their legal agents and medium of communication in relation to the terms of the lease - cf Magripilis v Baird [1926] QSR 89 at 96. In my view, the Trustees have not done that. The authority which Lloyd & Lloyd have been represented as having, and, I would infer, actually had, went no further than authority to receive and transmit to the Trustees leases intended for execution by the Trustees, and to retransmit executed leases back. They had at no time been appointed as agents for the Trustees to enter legal relations or to communicate approval of the Trustees to a lease in any way other than by passing on an executed lease. 50 In these circumstances, when Lloyd & Lloyd had neither actual nor ostensible authority to act on behalf of the Trustees, any conclusion that a lease arises from that correspondence fails. Was Any Agreement Abandoned? 51 An alternative submission which was put by the Trustees was that, even if there had been an initial agreement for lease, it was abandoned in consequence of the conversations occurring on 16 or 18 August. I do not accept that there was an intention to enter legal relations in those conversations. They were conducted in the context of a claim for compensation by the defendant. They amount, in my view, to agreement in principle on one element of a possible settlement of the dispute which had arisen. That does not make them contractual. Other Matters 52 I should record that the defendant expressly did not make any case which was based upon any actual or ostensible authority of Father Purcell to bind the Trustees to enter a lease. 53 The decision that I have arrived at is based on agency. As well, though, it is appropriate to record that there were various occasions, when the correct position concerning the role of Lloyd & Lloyd, and of relations between Lloyd & Lloyd, the Archdiocese and the Trustees was disclosed, at least in part, to the defendant. 54 Before the first lease was entered, on 4 June 1995, Father Purcell wrote to the defendant explaining the procedure that there would be concerning any lease. His letter included the statement: "The Lease documents as drawn up by the Parish solicitors will be submitted for your approval and signature. They will then be sent to the Archdiocesan Trustees for their signature. I do not anticipate that they will disapprove of TGP as lessees." 55 Other correspondence, including on 15 July 1995 from Father Purcell to the defendant, makes clear that the procedure required leases to be sent to the Trustees for signature. On 4 February 1998 Father Purcell wrote to the defendant concerning another possible new lease, saying: "If you wish to accept this offer I should appreciate your early advice so that I may obtain the necessary agreement from the Archdiocesan Trustees." 56 There are other examples, over the years, of that position being explained to some extent. The latest of them is Father Purcell's letter of 18 February 2004, quoted earlier (para [12] above). I accept that Mr McGuirk did not know of any Canon Law rules concerning "acts of extraordinary administration", or requiring approval of a commercial lease by the Ordinary for the Archdiocese, and hence that he did not know why the procedure of approval of a commercial lease by the Archbishop and execution by the Trustees was followed. However, he knew the practical effect of those rules so far as the defendant was concerned. In cross-examination, he gave the following evidence about his telephone conversation with Mr Casey in April 2004: "Q. And you said, did you not, to Mr Casey, "If we can't get a new lease we want to make sure we can get as much notice as we can"? A. I did. Q. At that stage you did not have - when I say "you" I mean the defendant - did not have in its possession any form of lease document executed on behalf of the plaintiffs? A. No, we didn't. Q. You knew, did you not, that to get a new lease, to use your expression, the defendant needed to have a lease document that was signed by the plaintiffs? A. Yes. " and: "Q. You knew that without the approval of the Cardinal or the Archbishop as the case may be there could be no lease? A. Yes." and: "Q. The fact of the matter is you knew in March 2004, did you not, that the defendant company needed to obtain the Cardinal's approval if it was to have a lease? A. I guess I did, yes. Q. So far as the defendant company was concerned, when it sent this letter of 22 March 2004 it was endeavouring by sending the letter to advance the process towards obtaining a lease document that was approved by Cardinal Pell? A. Yes." 57 If it is necessary for the operation of ostensible authority that there be reliance on a holding out of someone as having authority (a matter I need not decide), this evidence, and the defendant's conduct between med-April and mid-August in showing it was willing to leave, demonstrates that the defendant did not rely on Lloyd & Lloyd having authority to bind the Trustees. 58 Under these circumstances, I make the declarations set out in paragraphs 1 and 1A of the amended summons. I also order make an order in accordance with paragraph 1B of the amended summons. I will hear further submissions about what other consequential orders are needed. ********** 59 The remaining issue concerns by what date a writ for possession should be issued. The plaintiff seeks that it be issued by 3 May. That date is 1 day less than 2 weeks away. The basis of choosing that date is that there is evidence by the project manager for the university building project that if work is not begun by 4 May, then there will be difficulties in being able to complete the building work in time for the university to open in 2006. 60 The defendant is still carrying on its architectural practice in the premises. It would need to obtain alternative premises if there were not to be a hiatus in the practice. There is no specific evidence of how long that may take. It appears that there is a real possibility that there may be a need for development consent to be granted for premises, if they do not already have it, which are to be used as their offices. 61 The defendant contends that the plaintiff has been slow in prosecuting these proceedings, and therefore that it ought not be able to change the pace at this stage. I would agree that the plaintiff has been slow in starting the proceedings. However, the plaintiff's attitude has been made quite clear to the defendant since April of last year. Indeed, over the period from June to mid August the plaintiff was assisting the defendant in seeking to find alternative premises, and the defendant was willing to go. Under those circumstances, the fact that the plaintiff gave the defendant latitude ought not be held against it. 62 There is evidence that the university project is a substantial one, and that there will be numerous students accommodated at the Chippendale Campus. The plans are well advanced, with employment of some staff and production of brochures for student recruitment, to allow a commencement date at the beginning of the academic year 2006. 63 The evidence about what will happen if the date of 4 May is not met includes a letter from the Vice Chancellor of the University, Dr Tannock. He says that the builders had planned to have access to the site on 22 March 2005, and have indicated that they are unable to calculate the cost of delay beyond the period ending 4 May, largely because they cannot guarantee that the project would be completed in time for the university to open the campus in 2006. He attaches a spreadsheet showing the basis for this view. 64 Under these circumstances, I accept that there is a substantial risk of significant delay to a project of some public importance, quite apart from the importance it has to the interests which the plaintiff represents. 65 Under the circumstances, it is appropriate to make the order that the writ for possession be issued forthwith, for execution on 3 May 2005. 66 I make orders in accordance with the document entitled Orders Sought By the Plaintiffs which I initial date today's date and shall place with the papers. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.