Vasue v Lubo Medich Holdings [2008] NSWSC 899

New South Wales Supreme Court

CITATION : Vasue v Lubo Medich Holdings [2008] NSWSC 899

HEARING DATE(S) : 04-06 August 2008

JUDGMENT DATE : 6 August 2008

JURISDICTION : Equity

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 6 August 2008

DECISION : See para 66 of judgment.

CATCHWORDS : CONTRACT – offer and acceptance – whether the delivery of unsigned lease and lessor's disclosure statement constituted an offer – whether the return of the lessor's disclosure statement signed but with alterations constituted acceptance – no contract formed - ESTOPPEL – equitable estoppel – no assumption that defendant was legally obliged to enter into the lease – acts of detrimental reliance only minimal – not unjust for defendant to depart from assumption made by plaintiff – no estoppel

Trade Practices Act 1974 (Cth) LEGISLATION CITED : Retail Leases Act 1994 (NSW) Conveyancing Act 1919 (NSW)

CATEGORY : Principal judgment

Long v Piper [2001] NSWCA 342 CASES CITED : Veivers v Cordingley [1989] 2 Qd R 278 EK Nominees Pty Limited v Woolworths Ltd [2006] NSWSC 1172 Briginshaw v Briginshaw (1938) 60 CLR 336

Vasue Pty Ltd PARTIES : v Lubo Medich Holdings Pty Ltd

FILE NUMBER(S) : SC 2504/07

COUNSEL : Plaintiff: M W Sneddon Defendant: D H Murr SC & J B Conomy

SOLICITORS : Plaintiff: CMC Lawyers Defendant: Anthony Clive Parisi Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WHITE J

Wednesday, 6 August 2008

2504/07 Vasue Pty Ltd v Lubo Medich Holdings Pty Ltd JUDGMENT 1 HIS HONOUR: The plaintiff seeks orders to compel the defendant to give it a lease of a butcher's shop at 94 Broomfield Street, Cabramatta. It claims that in 2006 or 2007 it entered into an agreement with the defendant for the lease of the premises for a term of three years with a three-year option. Alternatively, it says that the defendant is estopped from denying that such an agreement was made, or is estopped from departing from an assumption it induced the plaintiff to adopt that the plaintiff would be given such a lease. The plaintiff also says that the defendant engaged in misleading and deceptive conduct, or made false or misleading representations as to the grant, or possible grant, of a leasehold interest in the property contrary to ss 52 and 53A(1)(b) of the Trade Practices Act 1974 (Cth). It seeks an order under s 87 of the Trade Practices Act that the defendant execute a three-year lease with a three-year option to do what it represented or promised. 2 The plaintiff has been in occupation of the premises since 1993. Its lease expired on 30 April 2006. The defendant denies that any new agreement for lease was entered into and says that the plaintiff has remained in occupation as a tenant from month to month under the holding over provisions of the lease which expired on 30 April 2006. 3 On 3 April 2007, the defendant gave written notice that the monthly tenancy would terminate on 3 May 2007. The defendant seeks an order for possession. 4 The principal issues are, first, whether a concluded agreement for lease was made. Secondly, what promises or representations were made as to whether the plaintiff would be given a lease of the premises. Thirdly, whether the plaintiff acted to its detriment in reliance on any such promise or representation. Fourthly, whether representations or promises made by the defendant were fulfilled; and fifthly, whether it is unconscionable for the defendant to depart from the plaintiff's assumption that it would be given a three-year lease and a three-year option. 5 Prior to 22 November 2005, the sole director and shareholder of Vasue Pty Ltd ("Vasue") was a Mr Chy Pou Yeak, known as Mr Jack Yeak. Vasue was also the lessee from the defendant of an adjoining newsagency. On 22 November 2005, Mr Jack Yeak was murdered. On 9 December 2005, three children of Mr Jack Yeak, namely Ms Mey Chou Yeak, Ms Ling Pao Yeak and Mr Ngim Chou Yeak met with directors of the defendant, namely Messrs John and Geoffrey Medich, and with the defendant's property manager, a Mr Heness. Mr John Medich expressed sympathy for what had happened to Mr Jack Yeak, but expressed concern about the closure of the butcher's shop and newsagency and asked how the family would run the business after his death. The leases on both shops were to expire on 30 April 2006. 6 There was a problem with respect to Mr Jack Yeak's estate. He apparently died intestate. He and his wife had divorced and a claim was made on the estate by a lady who managed the newsagency and who, I infer, claimed that she was his de facto wife. 7 The plaintiff alleges that in January or February 2006, Mr Heness represented to Mr Ngim Yeak that Vasue's solicitor should finalise the administration of his father's estate so that the defendant could grant the plaintiff a new lease. The plaintiff says that Mr Heness promised that the defendant would grant such a lease. Mr Heness says that he told Mr Ngim Yeak to see his solicitor to arrange for administration of the estate so that someone would have authority to deal with matters arising under the lease. He denies saying that a new lease would be given. I accept that denial. Mr Heness did not consider he had authority to promise a new lease. No terms of a lease had been discussed. It is clear from the subsequent correspondence from the defendant that the defendant's position was that it would consider an application for a lease, but it made no promise to enter into a lease with the plaintiff. 8 On 10 April 2006, a special grant of letters of administration was made to Ms Mey Yeak authorising her to exercise the rights attaching to the shares in the plaintiff held in the name of Mr Jack Yeak until letters of administration were granted. She undertook to maintain all necessary books of account in relation to the businesses operated by her pursuant to the special grant. 9 On 7 March 2006, the defendant required that the butcher's premises be repainted pursuant to cl 19 of the lease. That clause required the lessee at least once during the term of the lease to paint the premises to a standard reasonably required by the lessor. 10 On 23 March 2006, Mr Heness wrote to Mr Ngim Yeak. He said that he was enclosing a standard lease application to be completed for consideration by the lessor, although the form may not have been included with the letter. Be that as it may, at that time it is clear that no commitment had been given by the defendant to enter into a new lease. 11 On 27 March 2006, Mr Ngim Yeak advised that the family did intend to apply for continuation of the leases on the butcher's shop and newsagency. The lease application form was sent by 3 April 2006. 12 On 18 April 2006, Messrs Watson & Watson, solicitors, who had acted for Ms Mey Yeak on the application for a special grant of letters of administration, wrote to Mr Heness advising him of her appointment. They advised that she was the only person who could speak on behalf of the company and that any dealings in connection with the occupation of the butcher's shop or newsagency should be through her. They enclosed an application by her for renewal of the then current leases. 13 Mr Ngim Yeak deposes that in late April 2006, he had a conversation with Mr Heness to the following effect: " In or about late April 2006 I had a conversation with Peter Heness. During this conversation words were said to the following effect: I said: 'Our administration is now in place. Can you issue us with the new lease?' Peter said: 'Yes, we will do that.' I said : 'Can you tell me what the new rent will be?' Peter said: 'The rent won't be the same, it will be increased.' I said: 'That's fine.' Peter said : 'You need to paint both shops and repair all the tiles in the butchers [sic] shop. You also need to take off the wall papers off [sic] the newsagent.' I said : 'Yes, we will do that.' Peter said : 'We want the image of the shops improved.' I said : 'Yes, that's fine. It is in our best interests to do this.' I said : 'What about the terms? Can we have 5 [years] by 5 [years]?' Peter said : 'We are giving you a 3 by 3.' I said : 'Yes, that's fine. Can you go ahead and organize leases so that we can sign?'" 14 Mr Heness denied that he gave any assurance that the plaintiff would be issued with a new lease. The plaintiff pleaded that this conversation gave rise to a binding agreement for lease. In final submissions that contention was not pressed, and rightly so. On any view, there was no agreement as to the rent for any new lease. The language as deposed to by Mr Yeak was not the language of an immediately binding contract. Moreover, although Ms Mey Yeak had authorised her brother to speak on her behalf, the defendant had not been told he had any authority to do so. Mr Heness could not have considered he was dealing with someone with authority to bind the plaintiff. Nor did he have authority to bind the defendant. There were also unresolved outstanding issues regarding repainting. I accept Mr Heness's denial, but even on Mr Yeak's evidence there was no agreement for lease. 15 On 12 May 2006, Mr Parisi, the solicitor acting on behalf of the defendant, advised Mr Hannah, the solicitor with Watson & Watson, that no new leases of either premises had been formally agreed to at that time. 16 Mr Heness does accept that prior to 9 October 2006, being the date on which the defendant delivered a proposed lease and disclosure statement to the plaintiff, there had been discussions with the plaintiff about a three-year lease with a three-year option at a rent which would be increased from that then being paid. 17 In June 2006, Mr Heness provided a report to the Messrs Medich on an appropriate rent for the butcher's shop having regard to comparable rents at adjoining premises. The butcher's shop's rent was then $2,201.15 per month or $351.86 per square metre. Mr Heness calculated this was well below the rent on a per square metre basis of the surrounding shops. Apart from the newsagency, he calculated that the adjoining rents averaged $514 per square metre. 18 On 12 May 2006, Sydney Water Corporation wrote to Mr Heness advising that the butcher's shop was operating without a required grease arrestor. Sydney Water required that the defendant install an approved grease arrestor and basket traps in any floor wastes, and that that work be done by 12 July 2006. On 15 May, the defendant wrote to the plaintiff advising of Sydney Water's requirements. The defendant contended that the works were the lessee's responsibility pursuant to cl 23 of the lease. That, of course, was a reference to the existing lease which had expired on 30 April 2006, but under which the plaintiff was holding over. 19 Clause 23 did not oblige the plaintiff to do those works, but another clause in the lease, namely cl 3(xv) of memorandum S231984, which was incorporated into the lease, did so. In any event, it was open to the lessor to require the plaintiff to carry out the works if it wanted a new lease. The plaintiffs did not deny that it was liable to carry out the works. However, it took no steps to do so. 20 On 24 July 2006, Sydney Water wrote again to the defendant, noting that the grease trap had not been installed and threatening suspension or cancellation of its commercial trade waste-water permit. On 25 July, Mr Heness wrote to Ms Mey Yeak requiring that the matter be dealt with urgently. He advised that Sydney Water had said that if the order was not complied with, the sewer might be cut off from the main. 21 In September 2006, a nearby butcher's shop became available for sale at 129 Cabramatta Road, Cabramatta. Mr Ngim Yeak, his sister, Ms Mey Yeak, and their mother, discussed the possibility of purchasing it. Mr Ngim Yeak spoke to the agent and offered $550,000 to buy the property. This was not a formal offer whose acceptance could result in a contract. It was an oral expression of an intention to purchase at that price. However, the next day the offer was withdrawn. This followed discussions between Ms Mey Yeak, Mr Ngim Yeak and their mother. The latter two persuaded Ms Mey Yeak that they could reliably expect to be offered a new three-year lease with a three-year option from the lessor having regard to the length of time they had been in occupation of the premises, having regard also to Mr Ngim Yeak's having been told that the landlord was preparing a new lease for them, and also having regard to the moneys they had spent on the shop. Mr Yeak says that: " Had we known that the landlord would not give us a new lease, as promised, then we would have purchased the shop. " 22 Even on the plaintiff's evidence, at this time the defendant had not made any commitment to enter into a new lease with the plaintiff. The rent was still to be agreed. In any event, the plaintiff's position ignores the fact that the defendant did propose entry into a new lease. On 9 October 2008, the defendant delivered a lessor's disclosure statement and a proposed lease. The new rent was to be $3,016.22 inclusive of GST. This was a 37 percent increase on the existing rent. The lease was to commence on 1 November 2006. It provided for a three-year term with a three-year option. 23 The documents delivered also included a lessor's disclosure statement as required by s 11 of the Retail Leases Act 1994 (NSW) and was in the form required by Sch 2 Pt 2 of that Act. The document contained the lessee's disclosure statement to be completed by the lessee pursuant to s 11A of that Act. On the first page of the lessor's disclosure statement the defendant stipulated: " Lessee to § Re-Paint [sic] the premises prior to renewal of lease in a proper and workmanlike manner and to reasonable standard in two coats of white acrylic paint to be approved by Lessor. § Floor tiles in front of cool room to be replaced with tile of same quality and colour. § Broken white wall tiles to be replaced throughout where required with tile of same quality and colour. § Install a 1,000 litre Boat Grease Arrestor and Basket Traps in any floor waste to Sydney Water specifications. § Replace ceramic tiles to exterior shopfront, sample to be approved by lessor prior to installation." 24 The enclosed proposed lease did not include provisions imposing the same obligations on the lessee with this specificity, although the requirement to install the grease trap would have been covered by cl 24.1 of the proposed new lease which would have required the lessee to comply with the requirements of any competent authority having authority with respect to the demised premises or the lessee's use and occupation of the premises. 25 The plaintiff says that the delivery of these documents was an offer to lease the premises on the terms of the enclosed lease. It says that it accepted the offer on 31 January 2007 or on 16 February 2007. I do not agree that the delivery of those documents constituted an offer capable of bringing a contract into existence immediately on acceptance by the plaintiff. The lease document itself was in the usual form and provided for it to be executed by both parties. Nothing in the negotiations suggested that the parties intended to enter into a binding agreement for lease in advance of entering into the lease itself. The defendant required works to be carried out which were not specifically provided for in the lease. Hence it is unlikely that it would have agreed to be bound by an acceptance of the alleged offer if the works had not been done. Moreover, a purpose of the lessee's disclosure statement is to formalise any representation upon which the lessee relies in entering into the lease. Considered objectively it is most unlikely that the lessor would contemplate the possibility of being bound by an acceptance of the alleged offer without the opportunity to consider the contents of the lessee's disclosure statement. 26 Although the presumption which applies to contracts for the sale of land that parties do not intend a binding agreement prior to exchange of formal contracts has no "necessary or direct equivalent in relation to leases of land" (Long v Piper [2001] NSWCA 342 at [53]), all the circumstances suggest that the parties intended to be bound only upon execution and exchange of the formal lease document. 27 The plaintiff submitted that the delivery of the documents conveyed a representation that the plaintiff would be given a three-year lease with a three-year option. That is putting things too widely. In my view, the delivery of the documents conveyed a representation that the defendant intended to give the plaintiff a lease on the terms of the enclosed lease document if the works specified in the disclosure statement were carried out, if there were no untoward disclosure made in the lessee's disclosure statement, and if the plaintiff indicated its acceptance of the terms of the lease by signing and returning the lease. That representation, conveyed by the act of delivering the documents, was not false or misleading. The defendant did intend that if the plaintiff executed and returned the documents unamended within a reasonable time, it would execute the lease also. 28 The plaintiff points to having carried out various works in reliance upon an assumption that it would be given a lease, or that the defendant was already bound to lease the premises to it. It points first to the painting of the premises. The butcher's shop and the newsagency were painted twice. Pursuant to correspondence in March, the plaintiff painted the butcher's shop. I infer that that work was done in or about August 2006. The defendant was dissatisfied with the quality of the work. From invoices produced, I infer that the butcher's shop was repainted in about November 2006. However, the plaintiff was required by the terms of the existing lease to paint the premises as often as the lessor might reasonably require to standards reasonably required by the lessor. 29 Whilst I accept that the plaintiff would not have painted the premises a second time, had it not anticipated receiving a new lease of the premises, I do not consider that conduct to be a relevant act of detrimental reliance because I am not satisfied that it was not, in any event, required to carry out that work. 30 In about September 2006, Mr Yeak engaged the services of a tradesman to replace broken wall tiles in the shop. On 18 October 2006, the plaintiff paid a $1,000 deposit for floor tiles. The entire floor was re-tiled in about April 2007. Mr Heness observed the re-tiling on 17 April 2007. On the following day he wrote to complain that the existing tiling had not been removed. He complained that the plaintiff had failed to contact the defendant to obtain its agreement to the works. By this time the plaintiff had been given notice to quit. The act of laying the floor tiles was not done in reliance on any assumption that the plaintiff would be given a new lease. But the payment of the deposit for the purchase of the tiles on 18 October 2006, and the replacement of broken wall tiles in September 2006, was work which was done in anticipation of such a lease. 31 On or about 23 January 2007, the plaintiff paid a deposit of $1,850 for a new display counter. It is not clear when installation of that counter commenced. There is no evidence that installation commenced prior to 20 February 2008. (The significance of that date will appear shortly.) Also, on or about 23 January 2007, the plaintiff obtained a quote to fix the rails on the existing counter. There is no evidence as to whether this work was carried out and, if so, when. 32 On 8 February 2007, the plaintiff paid a deposit of $1,970 for the supply of a new awning and sign. They have not been installed. I infer that the plaintiff paid the deposits for the tiles for the new display counter and for the new awning because it expected to be given a new lease of the premises. 33 The plaintiff did not install the grease trap as required by the defendant. It was not installed until this year. The installation of the grease trap was required under the existing lease pursuant to which the plaintiff was held over. The plaintiff says that in January 2007 it paid a non-refundable deposit of $3,000 towards the installation of the grease trap. That evidence is hotly in contest. Assuming it to be the fact, such a payment is, in any event, not an act of detrimental reliance on any representation by the defendant that the plaintiff would be given a new lease, because it is something the plaintiff was required to do in any event. 34 Ms Mey Yeak signed the lessee's disclosure statement on 1 December 2006. At the same time, she amended by hand the lessor's disclosure statement in three respects. The starting date for the lease was amended from 1 November 2006 to 21 December 2006. Had that amendment been accepted, it would have delayed until 21 December 2006, the time from which the increased rent became payable. Curiously, she also amended the commencement of the option period from 1 November 2009 to 21 December 2009 without amending the expiry of the lease period of 31 October 2009. The effect of that change, if given effect, would be to leave an hiatus from 1 November to 21 December 2009 if the option were exercised. Ms Yeak struck out the first bullet point quoted at [23] above because the repainting had already been done. 35 Mr Yeak said that Mr John Medich had agreed to the proposed change to the starting date of the lease. Mr Yeak said that Mr Medich agreed to postpone the commencement of the butcher's shop lease because he did not want Mr Yeak to bear any ill will towards him owing to what was said to be short notice given to the plaintiff to vacate the newsagency. The plaintiff was required to vacate the newsagency because it decided not to enter into the proffered new lease of the newsagency. 36 Mr Yeak did not give evidence in his affidavit of the alleged agreement by Mr Medich to the postponement of the commencement date of the lease of the butcher's shop. Mr Medich denied having agreed to such a postponement. I accept that denial. Where the evidence of Mr Yeak and Mr Medich was in conflict I preferred the evidence of Mr Medich. 37 Ms Yeak signed the lease a few weeks after 1 December 2006. The signed lease was never returned to the defendant. Both Ms Yeak and Mr Yeak knew that it was open to the plaintiff to accept the proffered lease or to reject it and vacate the premises. It was also open to them to negotiate for different terms. As I have said, the plaintiff chose not to enter into the proffered lease of the newsagency. 38 Just as the plaintiff understood it was not bound by a lease or an agreement to lease in respect of the butcher's shop at this time, it likewise understood that the defendant was also not obliged to proceed. 39 On 31 January 2007, the plaintiff's solicitor, Mr Capolupo, wrote to Mr Heness as follows: " We refer to previous correspondence in this matter and now enclose Lessor's Disclosure Statement duly executed by our client and amended as follows:-