Supreme Court New South Wales Medium Neutral Citation: Caringbah Business and Sports Club Limited v Caringbah Investments Pty Ltd [2015] NSWSC 724 Hearing dates: 17, 18, 24, 25, 26, 27 March and 9 June 2015 Decision date: 10 June 2015 Before: Lindsay J Decision: (1) Subject to formal orders being made, the plaintiff is entitled to orders for rectification of a lease, a money judgment and dismissal of the defendant's claim for an order for possession. (2) Reserve for further consideration any questions arising out of the appointment of voluntary administrators to the plaintiff. Catchwords: REAL PROPERTY – Torrens title - Leases – Determination – Re-entry - Sale and lease back transaction - Unregistered lease - Dispute regarding oral agreement as to rate of rent payable – Rectification EQUITY – Equitable remedies – Rectification Legislation Cited: Civil Procedure Act 2005 NSW Conveyancing Act 1919 NSW Gaming Machines Act 2001 NSW Land Tax Management Act 1956 Liquor Act 2007 NSW Registered Clubs Act 1976 NSW Registered Clubs Regulation 2009 NSW Cases Cited: Australian Co-Operative Foods Ltd v NORCO Co-Operative Ltd (1999) 46 NSWLR 267 at 279 [51]-[52] Bridgewater v Leahy (1998) 194 CLR 457 at 494 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 247-256 Equuscorp Pty Ltd v HGT Investments Pty Ltd (2004) 218 CLR 472 at 483 [33] Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 710 [443] – 713 [458] Hoyt's Pty Limited v Spencer (1919) 27 CLR 133 Issa v Berisha [1981] 1 NSWLR 261 at 264 Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 at 195B-196A Jones v Dunkel (1959) 101 CLR 298 Joscelyn v Nissen [1970] 2 QB 86 at 98 Kemp v Lumeah Investments Pty Ltd (1983) 3 BPR 9203 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350-351 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 Misner v Australian Capital Territory (2000) 146 ACTR 1 Pukallus v Cameron (1982) 180 CLR 447 at 452 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at 646-648 Saleh v Romanous (2010) 79 NSWLR 453 at 459 [52] - 462 [76]) Slee v Warke (1949) 86 CLR 271 at 280-281 Taylor v Johnson (1983) 151 CLR 422 at 432 The Club Cap Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 at [39] Valdasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 113-114 Texts Cited: PW Young On Equity, paragraph [11.250] [11.260] JD Hayden, MJ Leeming and PG Turner (Eds), (Law Book Co, Sydney, 2009) Maher, Gummow and Lehane's, Equity Doctrines and Remedies (Lexis Nexis Butterworths, 5th ed, Sydney, 2015), paragraph [27-010] Real Property Act 1900 NSW: PW Young, C Croft and ML Smith Category: Principal judgment Parties: Plaintiff (Lessee Club): Caringbah Business & Sports Club Ltd ACN 000 105 359 Defendant (Lessor): Caringbah Investments Pty Ltd ACN 106 601 954 Representation: Counsel: Plaintiff (Lessee Club): AP Cheshire (March 2015) and P Silver (9 June 2015) Defendant (Lessor): G George Solicitors: Plaintiff (Lessee Club): McLachlan Thorpe Partners Defendant (Lessor): Solari & Stock Lawyers File Number(s): 2014/001132332014/00341965 Judgment INTRODUCTION 1. The central, substantive dispute in these proceedings is about the terms upon which the plaintiff (a corporation limited by guarantee, and a registered club, known locally as "the Bizzo's Club") leased back premises in Mackay Street, Caringbah when, in December 2012, it sold the freehold of the property to the defendant. Upon a resolution of that dispute, and subsidiary issues, turns a dispute about whether the defendant validly terminated the lease and, if so, whether the plaintiff should be granted relief against forfeiture. 2. Acting on its understanding of terms allegedly orally agreed before execution by the parties of a formal memorandum of lease, the plaintiff paid rent at a rate less than that specified in the memorandum of lease. 3. On 25 February 2014 the defendant served on the plaintiff a notice of breach (under section 129 of the Conveyancing Act 1919 NSW) notifying the plaintiff of three alleged breaches by it of lease covenants, calling upon the plaintiff to remedy the alleged breaches and claiming an entitlement to forfeit the lease in the event of the notice not being complied with. 4. On 12 April 2014 the defendant served on the plaintiff a notice of termination of the lease and purported to take possession of (that is, to "re-enter") the premises. 5. The grounds for termination of the lease specified by the notice were: first, an alleged failure by the plaintiff to pay rent; secondly, an alleged failure by the plaintiff to pay outgoings due under the lease; and, thirdly, an alleged failure to obtain the defendant's consent to the operation of a bistro within the premises. 6. The plaintiff commenced these proceedings on 14 April 2014, when it obtained ex parte injunctive relief from the duty judge (Pembroke J), the effect of which was to restore possession of the premises to the plaintiff on an interlocutory basis. 7. On 15 April 2014 the parties agreed to an interlocutory regime that allowed the plaintiff to remain in possession of the premises provided that (without admissions) it thereafter paid rent and outgoings at rates demanded by the defendant. 8. On 6 May 2014 the expedition judge (Stevenson J) dismissed an application made by the defendant for an order that the plaintiff provide security for costs: [2014] NSWSC 548. 9. An expedited final hearing of the proceedings listed for 18 August 2014 was abandoned under the mistaken impression that the proceedings had been settled. 10. The proceedings came before me on 17 March 2015 in a second attempt at a final hearing. 11. That hearing was abandoned when, on the morning of the hearing, the defendant challenged the retainer of the solicitors for the plaintiff (because of an alleged want of authority in the putative directors of the plaintiff who made the decision to institute the proceedings) and foreshadowed an application for summary dismissal of the proceedings if that challenge succeeded. 12. The utility of the challenge was, at best, doubtful. A general meeting of the members of the plaintiff was known to have been scheduled for 23 March 2015. The business to be conducted at that meeting included a fresh election of the plaintiff's board of directors, and consideration of the pending proceedings. 13. The meeting was held on 23 March 2015. The directors having carriage of the proceedings were re-elected. They ratified the commencement and maintenance of the proceedings. The defendant withdrew its challenge to the retainer of the plaintiff's solicitors. 14. A third attempt at a final hearing, commencing on 24 March 2015, was successful. The hearing occupied four days. 15. As now formulated, the respective cases of the parties are embodied in an amended summons filed by the plaintiff, and a cross summons filed by the defendant, on 26 March 2015. These amended forms of originating process give formal expression to the cases stated in, and a joinder of issues effected via, written submissions dated 14 August 2014. 16. Whether the defendant's objection to the conduct of a bistro on the premises without a grant of the defendant's formal consent was ever a commercially significant issue for the defendant is doubtful. The bistro to which objection was taken was in operation at the time the defendant acquired the freehold of the premises and granted a lease back to the plaintiff. The defendant appears to have acquiesced in the ongoing operation of that bistro. 17. The objection taken to the bistro, in construction of a case for forfeiture of the lease, appears to have been a tactical manoeuvre rather than a real concern. In cross examination, the present principal of the defendant (Mr Erceg) appears to have been unconcerned about the operation of any bistro in the leased premises, past, present or future. The defendant's objection to the bistro operating in early 2014 having been taken, the plaintiff has taken precautionary steps to address it by implementing arrangements to ensure that the plaintiff clearly bears responsibility for the delivery of bistro services on the premises. If (contrary to my findings) a bistro was formerly operated in breach of the lease, that breach has been rectified. 18. The parties' dispute about rent depends for its determination: first, upon resolution of a dispute of fact about whether, before execution of the memorandum of lease, the parties orally agreed that the defendant would look to the plaintiff to pay only a lesser rate of rent than that recorded in the memorandum; and, secondly, if that dispute is resolved in favour of the plaintiff, upon an application of principles of estoppel and rectification to the facts as found. 19. The dispute about outgoings depends largely upon construction of the memorandum of lease. 20. By its summons, the plaintiff seeks relief to the effect that: first, it was never in breach of the true agreement between the parties; secondly, if it was and its lease is taken to have been forfeited, it should be granted relief against forfeiture; and, thirdly, it should be granted a money judgment for recovery of overpayments of rent, outgoings and electricity charges. Having been pressed by the defendant for allegedly under-paying rent and outgoings, the plaintiff claims to have been over-charged by the defendant for electricity. It claims an entitlement to a set off by way of adjustment of accounts. 21. By its cross summons, the defendant seeks: first, a declaration that it was entitled to terminate the plaintiff's lease; secondly, an order for possession of the premises; and, thirdly, a money judgment for unpaid arrears of rent and outgoings. 22. The parties have agreed on arithmetical calculations of the state of their accounts (referable to rent, outgoings and electricity) depending upon whether success attends the summons or the cross summons. They are agreed that, in either eventuality, the plaintiff is to be allowed a credit for electricity, but they differ greatly in their calculation of that credit. 23. The parties are agreed that a determination of the proceedings on the summons and cross summons will also effectively determine proceedings for a money judgment (referable to the dispute about outgoings) commenced by the defendant in the Local Court of NSW on 20 November 2014 and (pursuant to an order made under section 140 of the Civil Procedure Act 2005 NSW on 26 February 2015) transferred to this Court. In this, they are correct. It is not necessary to traverse the detail of what are clearly ancillary proceedings, bound to abide the determination of the principal proceedings. PRELIMINARY CONTEXT 1. The plaintiff is and was at all material times a registered club under the Registered Clubs Act 1976 NSW, the holder of a club licence under the Liquor Act 2007 NSW and the holder of poker machine entitlements under the Gaming Machines Act 2001 NSW. 2. It has traded as a licensed club, at the Caringbah address, since 1952. 3. The building at that address (erected on land contained in Folio identifiers 343/594838 and 30/662947) comprises three separate floors. The plaintiff trades as a club from the middle floor, at ground level. An upper level once housed the plaintiff's boardroom and other facilities used by members but, since the sale of the building to the defendant, it has generally remained vacant. The downstairs level is a basement area, part of which is used as a keg store, cellar room and general store room servicing the club operations conducted on the ground floor. 4. The plaintiff sold the building to the defendant, and leased back part of the building, under prolonged financial pressure from its bank. It may have overcapitalised the building, and suffered a loss of value associated with the Global Financial Crisis. Suggestions of that can be found in the evidence. It is not necessary to pursue them. What is clear is that, in 2012, until a lower payout of $2.1 million was negotiated with the bank, the plaintiff's indebtedness to the bank was of the order of $3.4 million, a figure in excess of the then market value of the property. 5. The defendant (then owned and controlled by a Mr Dunning and Mr Erceg) was fully informed of the plaintiff's financial difficulties, which it used to advantage in negotiating a purchase price ($2.5 million) lower than that ($2.8 million) initially agreed between the parties. 6. At the time the sale and lease back transaction was effected it was common knowledge, as between the plaintiff and the defendant, that informal negotiations were under way with the Cronulla Sharks Leagues Club with a view to the plaintiff merging with that Club, and with the possibility of the "Cronulla Sharks" (also known as "the Sharks" or "Sharkies") occupying the whole of the building, including that part comprising the premises leased by the plaintiff. 7. The plaintiff is and was at all material times a comparatively small club. The Cronulla Sharks is and was at all material times a much larger, stronger business operation. A merger between the Cronulla Sharks would be commonly regarded as a takeover of the plaintiff by the Cronulla Sharks. 8. In the lead up to the time when, on or about 7 or 10 December 2012, the plaintiff and defendant effected their sale and lease back transaction, each party was in communication with representatives of the Cronulla Sharks in exploration of prospects for a merger. 9. In the event, no merger took place. Any prospect of a merger faded from view in 2013. Mr Erceg became aware, in mid-2013, that it was not going to go ahead. Nobody now contends that it remains a possibility. THE MEMORANDUM OF LEASE Execution of the Memorandum 1. The memorandum of lease executed by the parties remains undated and unregistered but, apart from a dispute about the rate of rent payable by the plaintiff, the subject of an agreement between the plaintiff and the defendant as to its terms. The defendant does not contend that non-registration of the lease is an impediment to the plaintiff's claims for relief. 2. In the absence of any third party interests that would be affected by an order for specific performance of the parties' agreement for lease (embodied in the memorandum of lease), the parties have treated the plaintiff's lease as the equivalent, as between themselves, of a lease at law rather than, as it is, merely (pending registration of the memorandum) an equitable lease coupled with (via section 127 of the Conveyancing Act 1919 NSW) a monthly tenancy at law: Chan v Cresdon Pty Ltd (1989) 168 CLR 342 at 248-249 and 252; Kemp v Lumeah Investments Pty Ltd (1983) 3 BPR 9203. 3. The evidence is equivocal as to whether the sale and lease back transaction was effected on 7 or 10 December 2012, bearing in mind that the plaintiff continued in occupation of the club premises, evolving from an owner of the freehold of the whole building to lessee of part of it. 4. The transaction appears to have proceeded via a simultaneous exchange of contracts and settlement on 10 December 2012, after earlier plans for the transaction to be effected on 7 December 2012 fell through. A solicitors' "settlement sheet" and a bank cheque made out in favour of the defendant (for the first month's rent payable by the plaintiff) bear the date 7 December 2012. The vendor's counterpart of the contract is dated 10 December 2012. A letter dated 11 December 2012 written on the letterhead of the defendant's solicitors (under cover of which the rent cheque appears to have been delivered to the defendant) states that settlement took place on 10 December 2012. Identification of the Premises 1. The "premises" the subject of the lease comprise that part of the building "being all those ground floor lock-up premises known as 'Caringbah Business and Sports Club' (excluding foyer area) but including the loading dock and garbage room and all those basement lock-up premises known as the keg store, cellar/cool room and female staff [area] …". The Lease Term 1. The term of the lease is expressed by the memorandum to be a 10 year term, commencing on 7 December 2012, with two options to renew, each for a period of 10 years. Potentially, the total lease term could extend to 30 years from 7 December 2012. The Covenant to Pay Rent 1. By clauses 2 and 3 of the memorandum, the plaintiff covenanted to pay rent (by monthly payments in advance on the 1st of each month in each year) at the rate of $170,000 plus GST for the first year; $180,000 plus GST for the second year; $190,000 plus GST for the third year; and thereafter at rates of rental increased by the fixed percentage of 5% or a consumer price index increase, whichever is higher. 2. The plaintiff contends that (although the memorandum provides for these specified rates of rental during the first three years of the lease term) the true agreement between the parties was that the defendant would only ever charge the plaintiff rent at the rates of $150,000 plus GST for the first year; $160,000 plus GST for the second year; and $170,000 plus GST for the third year. The rationale for this is said to be that, if there was a merger between the plaintiff and the Cronulla Sharks, the defendant wanted to reserve a right to charge rent at the higher rates recorded in the memorandum. 3. The evidence does not permit a finding to be made that it was the intention of any party to effect a fraud on the Cronulla Sharks or that that club was ever misled as to the terms upon which the plaintiff occupied its premises as a lessee. There is evidence to the contrary. 4. The $20,000 differential between the rates respectively attributed to each of the first three years magnifies in importance in and following the fourth year of the lease because the amount of the rent agreed for the third year (be it $190,000 plus GST or $170,000 plus GST) provides the base upon which escalation of rent takes place in the fourth and subsequent years. 5. Nothing in the language of the covenant to pay rent (clause 2) and the rent review provision (clause 3) calls for specific attention beyond noting the absence from the lease of any provision (not uncommonly found in commercial leases) requiring the lessee to pay rent without any deduction or set off. 6. If the Court finds that the plaintiff would otherwise have been in breach of its covenants to pay rent and outgoings it claims an entitlement to an equitable set off in respect of overpayments it claims to have made to the defendant for electricity charges, which entitlement (it contends) would preclude a finding that it was in breach of its covenants. 7. As regards the present state of the parties' accounts for rent, outgoings and electricity, there is no dispute that a set off is available, if only because of the right of set off for which the Civil Procedure Act 2005 NSW, section 21 provides. The Obligation to Pay Outgoings (and Electricity Charges) 1. The plaintiff's obligation to pay "outgoings" is governed by the clause 4, read with the definitions of "Building", "Land", "Lease Year", "Outgoings Year" and "Premises" in clause 1.1. As noted in clause 1.1, "Outgoings" has the meaning given in clause 4. 2. The material definitions found in clause 1.1 of the memorandum are to the following effect: "Building means the improvements from time to time existing on the Land, including the Lessor's fixtures and fittings and any other improvements which the Lessor as owner, lessee or licensee develops in conjunction with the Land, whether those improvements are separate or not and, where appropriate, will be deemed to include the Land. Land means the whole of the land comprised in the Certificate(s) of title mentioned in the Lease, and includes any additional land which the Lessor develops by way of erecting further improvements or extensions and which is managed and operated in conjunction with the improvements from time to time existing on the Land. Lease Year means any year commencing on the commencement date of this Lease [7 December 2012] or any anniversary of that date. Outgoings Year means each 12 month period ending on 31 December in each year and notwithstanding that part of any such 12 month period does not fall within the Term. Premises means the part of the Building hereby demised [as recorded above] and includes the Lessor's Fixtures and Fittings." 1. Clause 4 reads as follows: "4. Outgoings 4.1 Outgoings defined For the purposes of this clause "Outgoings" means the total amount of costs and expenses incurred by the Lessor in respect of: (a) all rates, taxes, charges and assessments, duties, impositions and fees of any kind from time to time payable to any Government, Local Government, semi-government or other competent authority in respect to the Building and the Land; (b) land tax or taxes of the nature of a tax on land calculated as if the Premises were the only land owned by the Lessor and not the subject of a special trust (within the meaning of the Land Tax Management Act 1956 and the Lessor was not a company classified under section 29 of that Act as a non-concessional company; (c) all charges for, and costs in relation to supply of water and sewerage to and removal of all wastes and other garbage from the Building and the Land; (d) all amounts payable in respect of insurances and other charges including stamp duty thereon relating to the Building or the Land and the use and occupation thereof and the equipment and appliances therein, including but without limiting the generality of the foregoing, public risk, workers' compensation, fire and comprehensive insurance and loss of rent insurance for a period not exceeding three years; (e) the fees payable to specialist contractors and consultants in relation to the provision of services, maintenance, servicing and repair of the appurtenances of the Building; (f) the costs of operating and supplying all services from time to time provided by the Lessor for tenants and occupiers of the Building, including without limiting the generality of the foregoing, loading docks, storage areas, lifts, escalators, fire services, air-conditioning and the plant and equipment required in connection with any of those services; (g) the costs of repairs, renovations, replacements and maintenance of and to the whole or any part of the Building (excluding any work which amounts to a capital improvement or is of a structural nature) or of any services or finishes or fixtures or plant and equipment; (h) all costs and charges for lighting, power, cooling and heating incurred in connection with the Building and the Common Areas of the Building, or the Land; (i) the cost of the cleaning of the exterior and Common Areas of the Building [sic] any other improvements on the Land; (j) any contributions payable by the Lessor to the Body Corporate under the Strata Titles Act; (k) the costs of managing, controlling and administering the Building and the collection of rents and other money, including but without limiting the generality of the foregoing the reasonable wages and other emoluments paid to any Building manager and other clerical staff employed by the Lessor for these purposes, plus all statutory overheads related to such wages and fees and charges paid to any managing agent but not including leasing commissions and fees and salaries, wages, travelling and accommodation expenses incurred by the directors or administrative officers of the Lessor not directly engaged in the management and operation of the Building provide [sic] that for the purposes of this clause no regard shall be had to any commission payable to the Lessor's management agent for the collection of rents exceeding 3% of rent and outgoings collected by such managing agent; and [sic] but will not include: (l) any amount in respect of the capital costs of the Building; (m) any amount in respect of depreciation and. [sic] (n) Outgoings not specifically referable to any particular areas in the Building, unless the Premises is part of the areas to which the Outgoings are referable and the Lessee is not liable to contribute an amount in excess of an amount calculated by multiplying the total amount of that Outgoing by the ratio of the lettable area of the Premises to the total of the lettable areas of the areas to which the Outgoing is referable. An 'Outgoing' is referable to an area if the area is part of the areas in the Building that enjoys or shares the benefit resulting from the Outgoing. 4.2 Lessee's Contribution It is hereby expressly agreed between the parties to this Lease that in addition to the rent, the Lessee will pay to the Lessor the Lessee's Proportion of the Outgoings for each Outgoings Year, being the Lessee's Contribution. If however, the Lessee is the lessee of the Premises for part only of an Outgoings Year, the Lessee's Contribution for that part year will be determined by reference to the proportion of the Outgoings Year during which the Lessee has been the lessee of the Premises. 4.3 Lessee to pay charges levied on Premises The Lessee will pay all rates and taxes separately charged to the Premises and for electricity, gas, oil and water separately metered and consumed in or on the Premises, and will also pay all charges in respect of any telephone services connected to the Premises and all other charges and impositions by any public utility or authority for the supply of any service separately to the Premises. 4.4 Accrual All Outgoings irrespective of the period for which they are levied, assessed or charged will be deemed to accrue from day to day, and will be apportioned in respect of the time accordingly. 4.5 Lessor's estimate (a) At least one month before the commencement of each Outgoings Year, the Lessor will estimate the amount, if any, which the Lessor calculates will be payable by the Lessee to the Lessor as the Lessee's Contribution in respect of that Outgoings Year, and will notify the Lessee in writing of the amount of the estimate and will itemise the Outgoings under the item descriptions used in the list of Outgoings in the form of the Disclosure Statement. (b) On the first day of each month in each Lease Year the Lessee will pay to the Lessor one-twelfth of the amount so estimated by the Lessor, (c) Before one month after each Outgoings Year and one month after the mid-point of each Outgoings Year, the Lessor will make a written expenditure statement available for examination by the Lessee detailing all expenditure by the Lessor on account of the Lessee's Contribution, and will itemise the Outgoings under the item descriptions used in the list of outgoings in the form of the Disclosure Statement. (d) Within one month after the end of the relevant Outgoings Year or the Relevant Lease Year, whichever is the later, there will be an adjustment between the Lessor and the Lessee to take account of any under-payment or over-payment by the Lessee in respect of the Lessee's Contribution. The adjustment will be calculated on the basis of the difference between the estimate of the Lessee's Contribution and the amount actually expended by the Lessor in respect of those Outgoings, but only taking into account expenditure properly and reasonably incurred by the Lessor in payment of those Outgoings. (e) Within 3 months after the end of each Outgoings Year, the Lessor will give to the Lessee a written report which details all expenditure by the Lessor during the relevant Outgoings Year on account of Outgoings." 1. The expression "Lessee's Contribution" is defined by clause 1.1 to mean "the amounts determined from time to time under clauses 4.2 and 4.5". 2. The expression "Lessee's Proportion" is defined by clause 1.1 to mean the percentage specified in Item 3 of the Reference Schedule to the lease; namely, 33.33%. 3. The parties' dispute about outgoings turns on the construction and operation of clauses 4.1, 4.2 and 4.5 read with Item 3 of the Reference Schedule. 4. The dispute, specifically, about electricity charges turns on the terms of clause 4.3 and the absence of any separate meter for consumption of electricity referable only to that part of the Building constituting the Premises. 5. Clause 27.1(3) of the memorandum bears on this dispute. It is in the following terms: "27. Lessor's Works. 27.1 The Lessor will, in a proper and workmanlike manner and at its own expenses [sic] prior to the Commencement Date [7 December 2012] or as soon as possible thereafter, undertake the following Lessor's Works:… 3. Ensure that water, electricity and gas are separately metered for the Premises…." Covenant Against Parting with Possession 1. Clause 19 (headed "Assignments, sub leases and mortgages") bears upon the dispute about the bistro. Clause 19.7, in particular, reads as follows: "19.7 Sublease, transfer The Lessee will not sub-let transfer or part with the possession of the whole or any part of the Premises, or the Lease of the Premises, or any estate or interest in the Premises, to any person, nor will the Lessee grant concessions or licences for the operation of any part of the business which the Lessee is permitted to conduct on the Premises without the Lessor's consent in writing, such consent not to be unreasonably withheld or delayed." 1. By clause 5.1 of the memorandum (read with the definition of "Permitted Use" in clause 1.1 and item 6 of the reference schedule), the plaintiff covenanted that it would not without the defendant's prior written consent "do or permit or suffer to be done", inter alia, use of the whole or any part of the Premises otherwise than for a Registered Club. The Importance of the Written Form of the Lease 1. Clause 21.15 of the memorandum is in the following terms: "21.15 Entire agreement To the extent permitted by law, in relation to the subject matter of this Agreement, this Agreement: (a) embodies the entire understanding of the parties, and constitutes the entire terms agreed on between the parties; and (b) supersedes any prior written or other agreement between the parties." 1. A similar "entire contract" clause appeared as clause 44 of the Contract for Sale. Entitled "Whole Agreement", it provided that "[this] Contract constitutes the whole agreement between the Vendor and the Purchaser and all previous negotiations and agreements between them concerning the Property shall cease to have effect." The defendant's lease back to the plaintiff was incorporated in the sale contract by clause 30. Unsurprisingly, the form of lease annexed to the Contract provided for rent in the same terms as the Memorandum of Lease contemporaneously executed by the parties. 2. Clause 21.3 of the Memorandum of Lease (entitled "Amendments") provides that "[this] lease may only be varied by a deed signed by or on behalf of each of the parties." Consequences of Default 1. Clause 21.4 provides as follows: "21.4 Waiver (a) Failure to exercise or enforce or a delay in exercising or enforcing or the partial exercise or enforcement of any right, power or remedy provided by law or under this Lease by any party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or further exercise or enforcement, of that or any other right, power or remedy provided by law or under this Lease. (b) Any waiver or consent given by any party under this Lease will only be effective and binding on that party if it is given or confirmed in writing by that party. (c) No waiver of a breach of any term of this Lease will operate as a waiver of another breach of that term or of a breach of any other term of this Lease." 1. Clause 14 contains the following provisions: "14. Default 14.1 Default The Lessee and the Lessor hereby agree and declare that each of the events set out in this clause 14 is a default by the Lessee: (a) the rent or other money reserved or made payable by the whole or any part of the Lease is unpaid for 14 days next after the same ought to have been paid, whether any formal or legal demand therefore has been made or not; (b) the Lessee fails to perform or observe any one or more of the covenants or provisions on the part of the Lessee expressed or implied in this Lease and provided that the Lessor shall have given written notice of such breach, default or non-observance and allowed the Lessee a reasonable time to rectify such breach (and the parties agree that 14 days is a reasonable time) and the breach, default or non-observance is not remedied within that notice period, (c) the Lessee becomes bankrupt, or insolvent, or makes any arrangement or composition with its creditors; the Lessee (being a company) goes into voluntary, compulsory or provisional liquidation, or is placed under official management, or an administrator is appointed or a receiver and/or manager of any of its assets is appointed; (d) any execution is issued against the Lessee; or (e) the Premises are deserted or vacated, and the Lessor may elect to treat any default as a repudiation of this Lease by the Lessee. 14.2 Forfeiture of Lease If the Lessee defaults in any of the respects set out in clause 14.1, the Lessor or any person authorised by the Lessor may and without prejudice to any other remedies of the Lessor, has power: (a) to resume, re-enter and take possession of the Premises, and to open by any means any door or fastening for the purpose of resuming possession of the Premises, and to expel and remove all persons, furniture and other property from the Premises without being liable for any action for trespass assault or other proceedings whatsoever for doing so, and to put an end to the Lease; or (b) by notice in writing to the Lessee to determine this Lease, and from the date of giving such notice this Lease will be absolutely determined; or (c) by notice in writing to the Lessee, elect to convert the unexpired portion of the Term into a tenancy from month to month, in which event this Lease will be determined as from the giving of that notice, and thereafter until the tenancy is determined, the Lessee will hold the Premises from the Lessor as a monthly tenant pursuant to the provisions of clause 18, and none of these actions will prejudice any right of action or remedy of the Lessor in respect of any breach of any of the conditions or agreement rules or regulations contained in the Lease and on the part of the Lessee to be performed or observed. … 14.6 Waiver The Lessor's failure to take action on a particular default on the part of the Lessee will not be construed as a waiver of that default, nor will any custom or practice which may develop between the parties in the course of administering this Lease be construed as a waiver or a reduction of the right of the Lessor to insist on the performance by the Lessee of any form, covenant or condition of this Lease, or to exercise any rights given to the Lessor on account of that default. WHAT WAS THE TRUE AGREEMENT ABOUT RENT? Battlelines of the Parties 1. A determination of the factual question whether (and, if so, in what terms) the parties, before execution of the memorandum of lease, made an agreement to the effect that, notwithstanding execution of the memorandum, the rent payable by the plaintiff to the defendant would be $150,000, $160,000 and $170,000 (plus GST) for the first three years of the lease term depends upon a consideration of conflicting testimony about pre-execution conversations in light of surrounding circumstances (including an absence of contemporaneous documentation) and subsequent events. 2. In approaching these questions one needs to take into account the following factors, amongst others: 1. at all material times before the parties entered into their sale and lease back transaction in December 2012, the defendant was owned and controlled by Messrs Erceg and Dunning. 2. in the months following that transaction there was a falling out between those two men (Mr Erceg says because of a failure on the part of Mr Dunning to make a promised financial contribution to the defendant's funding of its purchase). 3. over a period of time in 2013, as they sought to unravel their relationship, control of the defendant passed (in August 2013) into the hands of Mr Erceg to the exclusion of Mr Dunning. 4. it is only after control of the defendant passed into the hands of Mr Erceg that the defendant took steps (in December 2013) to contest the plaintiff's consistent payment of rent at a rate lower than that for which the memorandum provides. 5. the personal relationship between Messrs Erceg and Dunning is now marked by strong animosity. 1. The defendant, principally through the direct evidence of Mr Erceg but also indirectly through evidence about subsequent events given by the defendant's real estate agent Mr Cooper, denies that there was ever any special arrangement between it and the plaintiff for the plaintiff to pay rent at a rate lower than the rates recorded in the memorandum. 2. The plaintiff adduced evidence, broadly consistent, from four witnesses who deposed to a specific conversation (at an indeterminate date in late 2012) in which Messrs Erceg and Dunning, then both representing the defendant, are alleged to have agreed with them, as representatives of the plaintiff, that the rent payable by the plaintiff would be the lesser sums notwithstanding the form of the memorandum. 3. Those four witnesses were: 1. Mr Grimshaw, then and now a director of the plaintiff; 2. Mr Wallace, then and now a director; 3. Mr Collings, then, but not now, a director; and 4. Mr Dunning, Mr Erceg's former business associate. 1. At and throughout the hearing, the defendant strenuously challenged the credit of Messrs Grimshaw and Dunning, but expressly forbore from any attack on the credit of Messrs Wallace and Collings. 2. Attacks on the credit of Messrs Grimshaw and Dunning require particular notice. 3. In the course of cross examination of Mr Dunning, first, and then Mr Grimshaw, the defendant alleged (and each cross examinee denied) that, in April 2013, Mr Grimshaw, in the company of Mr Dunning, demanded from Mr Erceg a payment of $100,000 to secure the plaintiff's compliance with the rent provisions recorded in the Memorandum of Lease. 4. Mr Erceg's affidavit (sworn on 24 June 2014) referred to an alleged meeting between Messrs Grimshaw, Dunning and Erceg in a car park at North Cronulla in or about April 2013, but omitted any reference to an alleged demand for money by Mr Grimshaw or any payment by Mr Erceg of money demanded. The defendant's allegation of a bribe, allegedly sought and paid in April 2013, emerged for the first time in cross examination of Mr Dunning. 5. The allegation of bribery having been denied by each of Messrs Grimshaw and Dunning in cross examination, I declined to allow the hearing to be diverted by a collateral enquiry into an allegation which, in my assessment, went essentially to their credit rather than an issue of fact for determination and, even then, in a way which (if proved) cast as much doubt on the credibility of Mr Erceg as it could on Messrs Grimshaw and Dunning. 6. The occasion of an alleged bribe occurred five months after the sale/lease back transaction between the plaintiff and the defendant was effected in December 2012. By that time the plaintiff had established a regular pattern of monthly rental payments consistent with the case it seeks to make about an oral agreement said to have been made before the sale/lease back arrangement was effected. The plaintiff's evidence about that oral agreement included evidence of two witnesses (Messrs Wallace and Collings) against whom no credit attack was, or is, made by the defendant. These features of the litigation are objective facts. 7. I leave to one side an unexplored possibility that a bribe (if sought and paid in April 2013) would not have been necessary but for the existence, in fact, of an oral agreement such as that for which the plaintiff contends and which the defendant denies. Nevertheless, exploration of the defendant's bribe allegation (affecting the credit of two or three individual witnesses) appeared to me an unproductive diversion from a pressing need to determine the respective rights and obligations of the corporate parties. 8. Whether the bribe allegation should be referred to a responsible authority for investigation is a question which can, and should, await determination of these proceedings, at which time I propose to invite submissions. 9. Each of Messrs Grimshaw and Dunning was singled out for particular credit attacks by the defendant. 10. They were portrayed by Mr Erceg as having colluded against him. In cross examination of them counsel for the defendant suggested (and they denied) that Mr Dunning is dependent on Mr Grimshaw for his current employment. Mr Dunning was evidently given an introduction by Mr Grimshaw that led to Mr Dunning securing employment; but that falls short of the more sinister connection the defendant advanced. 11. In the case of Mr Grimshaw particular credit attacks related to controversies in which he was engaged in a former life as a Victorian policeman. In the case of Mr Dunning they focused on: (a) alleged duplicity in the business relationship between Messrs Dunning and Erceg, denied by Mr Dunning; (b) an allegation by Mr Erceg (denied by Mr Dunning in cross examination) that, after a court appearance on 16 April 2014, Mr Dunning told him that there never had been an oral agreement about rent different from that recorded in the Memorandum of Lease; and (c) an allegation by Mr Erceg (which the defendant declined to apply to have dealt with for contempt of court) that, leaving the Court after having given his evidence, passing by Mr Erceg in court, Mr Dunning threatened him. 12. I did not discern, in the manner in which they gave evidence, any reason for doubting the credit of either Mr Grimshaw or Mr Dunning. Each man was measured and plausible in presentation. The evidence of both men was corroborated by that of Messrs Wallace and Collings as regards the disputed conversation about rent referable to lease negotiations in 2012. 13. Mr Grimshaw's evidence about what occurred at a meeting of directors of the plaintiff attended by Mr Erceg on 19 November 2013 is corroborated by the minutes of the meeting and others present; Mr Erceg says, and other attendees deny, that he spoke to the meeting about the plaintiff's rent rising to $180,000 under the memorandum of lease. 14. It is common ground, nevertheless, that Mr Erceg did not mention to the meeting the contention of the defendant (by that time, owned and controlled by himself alone) that the plaintiff had been underpaying rent, and was therefore in arrears. 15. In cross-examination Mr Grimshaw, in particular, answered questions about his police service calmly and directly. In re-examination, he offered explanations of events which, without explanation, were capable of assuming a guise more sinister than ultimately they bore. An admitted blemish on his record as a policeman is, however, that, in 1990, he was found guilty of contempt in the Supreme Court of Victoria for threatening a witness. He admitted the Court's finding but appears, in a restrained way, to regard it as unfair. It is too remote to have any bearing on current controversies. 16. In the context of the whole of the evidence, the defendant's attacks on the credit of Messrs Grimshaw and Dunning do not go very far at all in any bearing they have on a determination of the critical fact in issue; namely, whether there was an oral agreement between the plaintiff and the defendant for the rent payable by the plaintiff to the defendant to be $150,000, $160,000 and $170,000 (plus GST) for the first three years of the lease term. 17. That is because no attack is made on the credit of the witnesses Wallace and Collings and, in the course of his cross examination, Mr Erceg specifically spoke well of Mr Collings as a man with whom he had a reasonable relationship. 18. The defendant contends that the conversation with Mr Erceg to which Messrs Grimshaw, Wallace, Collings and Dunning depose did not occur. 19. It does not contend that there are material differences in the terms of the different versions of the conversation to which the plaintiff's witnesses depose. 20. Approaching the task of fact finding with due caution, without making any adverse credit findings against either Mr Grimshaw or Mr Dunning, I proceed on the basis that the plaintiff has adduced evidence from both Mr Wallace and Mr Collings, prima facie credible, that there was an agreement about rent of the nature of that alleged by the plaintiff. It is to their evidence that I principally refer, though not to the exclusion of the evidence of Messrs Grimshaw and Dunning. Close attention to objective facts, and surrounding circumstances, is required. 21. If the defendant is to succeed in persuading the Court that the disputed conversation did not occur it must persuade the Court not to accept the evidence of Messrs Wallace and Collings, as well as that of Messrs Grimshaw and Dunning. 22. Of course, I proceed on the basis that the legal onus of establishing that the disputed conversation did occur remains at all times on the plaintiff. The Plaintiff's Evidence of an Oral Agreement 1. The Evidence of Mr Wallace. Mr Wallace is the treasurer of the plaintiff. He has no professional qualifications, but he is a substantial businessman engaged in importing, wholesaling and retailing. 2. A convenient summary of his evidence of the disputed conversation is found in paragraphs 2 - 6 of his affidavit sworn 2 May 2014: "2. In late 2012 I was present in the club trading premises. I joined an informal meeting which was already in place when I arrived. Already present were my fellow director Rod Grimshaw, who was speaking with Martin Dunning and Walter Erceg. Walter and Martin were the directors of the Defendant, which was then in negotiations with the Plaintiff for purchase of the property at … McKay St Caringbah. I believe that Al Collings also attended the meeting. 3. When I arrived, Rod said to me: 'Martin and Walter need to raise the rent on the lease to $170, 180, and 190'. I was aware at that time that the presently negotiated rental amount was for $150,000 in the first year, $160,000 in the second year, and $170,000 in the third year. I said: 'But I thought we were agreed at the 150, 160, and 170? We can't afford to go higher than that.' 4. Rod then said to me, in the presence of both Walter and Martin: 'The agreement is that the higher amounts will go onto the Lease. We will only have to pay the higher amounts if the Sharkies come in and buy us out or merge. The boys want to be able to charge a bit more for rent if the Sharkies come in, and they are pretty confident that they will.' I understood the reference to Sharkies to mean the Cronulla Leagues Club. 5. Rod then said, looking at Walter and Martin: 'Isn't that right?' 6. Either Martin or Walter said: 'That's right. That's the agreement. The higher amount goes onto the lease document, but it will only become payable if the Sharkies come in. You will only ever have to pay the 150, 160, 170. We are happy to take that risk because we are very confident from our discussions with Sharkies that they will come on board. They can afford to pay a bit more.'" 1. Mr Wallace adhered to the substance of this evidence in cross examination. 2. The Evidence of Mr Collings. Mr Collings is a retired police officer. As a policeman he had no association with Mr Grimshaw. A convenient summary of his evidence about the disputed conversation can be found in paragraphs 3-4 of his affidavit sworn 5 August 2014: "3. In about late 2012, I attending [sic] a meeting with Rod Grimshaw ('Grimshaw'), Walter Erceg ('Erceg') and Martin Dunning ('Dunning') at the Royal Motor Yacht Club at Woolooware Bay. I do not have a precise recollection of the conversations that occurred during the course of that meeting but do recall that its purpose was to discuss interest expressed by Erceg and Dunning in the acquisition of the Plaintiff's Mackay Street premises. 4. Shortly after the meeting at the Royal Motor Yacht Club referred to in paragraph 3 above, I attended a further meeting at the Plaintiff's Mackey Street premises with Grimshaw, Dennis Wallace ('Wallace'), Erceg and Dunning. During the course of that meeting, Erceg said words to the effect of:- Erceg: 'We are happy to agree that the rent will be $150,000.00 for the first year, $160,000.00 for the second year and $170,000.00 for the third year for you guys but the lease is going to have to read $170,000.00, $180,000.00 and $190,000.00. If you do a deal with the Sharks and they come on board in some way, then the higher amounts in the lease will have to be paid. Until they come on board, or if they don't, you can just pay the lower amount.' Grimshaw: 'That's fine with us. As long as you know that we can't pay the higher amounts unless the Sharks come on board, that's fine.'" 1. Mr Collings adhered to the substance of this evidence in his cross examination. Assessment of the Evidence 1. Observations about Credit. I accept both Messrs Wallace and Collings as reliable witnesses of truth. 2. Nevertheless, before determining whether their evidence should be accepted over the denials of Mr Erceg, attention must be given to a number of factors that occurred before and after the sale and lease back transaction was effected, as well as the credit of the defendant's witnesses. 3. I have reservations about the credibility of evidence given by Mr Erceg arising from the manner of his giving evidence. 4. He seemed, to me, overly intent upon conveying to the Court an impression that Messrs Grimshaw and Dunning, but particularly Mr Grimshaw, are men, not only not to be trusted, but, by him, to be feared. He used a protestation of fear of Mr Grimshaw as an excuse for delay, on his part, in causing the defendant to communicate to the plaintiff a complaint about the under-payments of rent now alleged against the plaintiff. He could, at any time from early 2013, have communicated such a complaint through the agency of solicitors on both sides, but he remained silent until (at least, as he would have the Court accept) 19 November 2013, when he attended a meeting of the plaintiff's Board of Directors. 5. I accept that his falling out with Mr Dunning could have, for a time, delayed action by the defendant in enforcement of rights now alleged against the plaintiff; but the absence of even a formal inquiry about the level of rent paid by the defendant through virtually the whole of the first year of the lease (when the plaintiff had clearly established a routine of making monthly rental payments at the rate of $150,000 per annum) is remarkable. It is, moreover, consistent with characterisation of Mr Erceg's delay as a product of a determination on his part to force the plaintiff out of the building (by strategically timed demands for enforcement of the memorandum of lease as executed) after the possibility of a merger between the plaintiff and the Sharkies had evaporated in mid-2013. 6. Mr Erceg's evidence is, to some extent, corroborated by Mr Cooper in explaining delays on the part of the defendant in constructing a commercial strategy for confronting the plaintiff with a demand for an increase in rent. However, Mr Cooper's involvement in events unfolding throughout 2013 was comparatively marginal, he was dependent upon Mr Erceg for instructions and he was not a participant in the negotiations of 2012. 7. My doubts about the credibility of Mr Erceg, coupled with my acceptance of Messrs Wallace and Collings as witnesses of truth, incline me to prefer the plaintiff's evidence about the alleged oral agreement about rent, but attention must be given to particular facts independently of impressionistic assessments of witness credibility. 8. Pre-Settlement Events. I deal, initially, with several factors referable the period before the transaction was effected on or about 10 December 2012. 9. First, there is an absence of contemporaneous documentation bearing upon the issue for determination. No minutes of meetings. No file notes. No diary notes. No correspondence. 10. Understandably, the defendant made much, in particular, of the non-production by the plaintiff of minutes of meetings contemporaneous with negotiations for the sale and lease back transaction. 11. Upon a call for the production of documents being duly made by the defendant, the parties agreed that: 1. the plaintiff had produced no minutes of meetings of the Board of Directors of the plaintiff for the period between 27 June 2012 and 8 January 2013; and 2. the plaintiff had produced no minutes of meetings of the members of the plaintiff for the period between 27 June 2012 and 19 December 2012. 1. The plaintiff's explanation for this was that it had been unable to locate the missing minutes, still thought to be held in storage in the leased premises, because the plaintiff's records are in a shambolic state consequent upon disruption of its possession of the premises by the defendant. 2. Until May or June 2014 the plaintiff had, outside the lease terms, occupied office space described as "the boardroom" on the top floor of the building. After the commencement of these proceedings, the defendant required the plaintiff to vacate that area. Consequently about 150 archive boxes of the plaintiff's papers (including minutes of meetings, the plaintiff says) were relocated to the company's "garbage room" in the basement. The plaintiff says that particular documents cannot readily be found, and missing minutes have not been found, in unsorted materials in the archive boxes. 3. Counsel for the defendant cross examined the plaintiff's principal witnesses at length about whether meetings of the company's board of directors had formally met to approve the sale and lease back transaction, and about whether there had been a meeting of the ordinary members of the company to approve it. Absent minutes of meetings, the evidence given in the affirmative to each inquiry lacked precision as to dates, but I accept its veracity. 4. The contract for sale of the plaintiff's land to the defendant was silent about the need for the plaintiff to obtain a resolution of its membership approving the sale so as to conform to the requirements of section 41J of the Registered Clubs Act 1976 NSW. 5. It may be that all or some of the requirements of that section were not, in fact, required because of the operation of the exemption provisions in section 41J(4), read with clause 19 of the Registered Clubs Regulation 2009 NSW. That possibility was not explored in these proceedings because counsel for the defendant disclaimed any contention that section 41J, so far as applicable, was not complied with. 6. The limited objects of his cross examination appear to have been: (a) to test the accuracy and reliability of evidence of the plaintiff's witnesses about the disputed conversation about rent; and (b) to paint a picture of the plaintiff's internal administration inconsistent with the company being relied upon in the future to perform its covenants as a lessee should the Court grant it relief against forfeiture. 7. In circumstances in which both parties to the sale transaction were represented by solicitors, neither side contends that the requirements of section 41J were not complied with, and the evidence before the Court is consistent with the transaction having stood for more than two years without any criticism by a public authority about the way it was effected, I am content to proceed in these proceedings on an assumption that section 41J was duly complied with. 8. Secondly, in light of evidence of Messrs Grimshaw and Wallace that the plaintiff's solicitors had been informed of "the true agreement" about the rent payable before execution of the Lease, the absence of any solicitor from the witness box calls for an inference, in accordance with Jones v Dunkel (1959) 101 CLR 298, to the effect that no evidence the solicitors might have given could have been of assistance to the plaintiff. 9. Thirdly, the absence of corroborative evidence from all the directors of the plaintiff who authorised the plaintiff's entry into the sale and lease back transaction equally calls for a Jones v Dunkel inference against the plaintiff in respect of evidence that missing directors could have given. 10. Fourthly, the defendant contends that the involvement, from an early stage of the parties' negotiations, of lawyers in the process of negotiating the legal form of the transaction (a sale, with a lease back) is inconsistent with the possibility that the disputed conversation occurred. It certainly counsels caution against acceptance of the plaintiff's evidence, but it is not determinative. 11. Fifthly, the defendant also contends that uncertainty about the timing of the conversation tells against acceptance of the plaintiff's version of events. Again, any such uncertainty counsels caution but is not determinative. 12. Sixthly, the objective fact is that, in attending to settlement of the sale and lease back transaction on or about 10 December 2012, the solicitors arranged for the first month's rent payable by the plaintiff to be deducted from the sale proceeds at the higher (memorandum) rate rather than the lower (allegedly orally agreed) rate, albeit that (without any immediate objection on the part of the defendant) an adjustment was made by the plaintiff in arranging for the next month's rent payment so as to conform to the terms of the oral agreement alleged by the plaintiff. 13. Rental payments after that for the first month of the lease term were paid by an electronic funds transfer, the first of which adjusted what the plaintiff contends was an overpayment in the first month. That adjustment having been made, the plaintiff's monthly payments conformed to the plaintiff's contention as to the true agreement about rent. 14. Seventhly, no point is taken, on either side of the record, about the absence of any evidence from Mr John Star, a consultant engaged by the plaintiff. It is agreed that, although he attended one meeting between representatives of the parties, his involvement was too early in negotiations to warrant comment about the absence of any evidence from him. 15. Eighthly, the defendant contends, the drafting history of what became the memorandum of lease is inconsistent with the disputed conversation ever having taken place. This contention demands close attention; but, closely scrutinised, it must be rejected. Once again, caution is required in the weighing of evidence. 16. The defendant points to a continuing process of negotiations, evidenced by correspondence between the parties' respective solicitors, between 22 October 2012 and 10 December 2012 or thereabouts: with variations in the sale price of the land, the annual rental rates, whether those rates were GST inclusive or GST exclusive, and the amount (and character) of security to be provided by the plaintiff for the rent. 17. It points, in particular, to variations in the rental rates provided in successive drafts of the lease exchanged by the parties' solicitors in the course of negotiations: 1. the rental rates were $150,000, $160,000 and $170,000 per annum inclusive of GST in drafts exchanged on 22 and 30 October and 1 and 9 November 2012. 2. a draft lease sent by the defendant's solicitors to the plaintiff's solicitors on 14 November 2012 provided for rental rates of $150,000, $170,000 and $180,000 per annum plus GST. 3. a draft lease sent by the plaintiff's solicitors to the defendant's solicitors on 27 November 2012 provided for rent of $170,000, $180,000 and $190,000 per annum plus GST (and a reduction in the sale price of the land from $2.8 million to $2.5 million). 4. thereafter, all draft leases exchanged between the solicitors (on 29 November and 4, 5 and 6 December 2012) provided for rent at the rate of $170,000, $180,000 and $190,000 per annum plus GST. 1. Two discontinuities are evident in this sequence of events. 2. The first occurred on 14 November 2012 when there was a departure from earlier designation of rental rates of $150,000, $160,000 and $170,000 per annum inclusive of GST. The rental rate for each of the second and third years was increased by $10,000, and all rental rates were expressed as "plus GST" rather than "inclusive of GST". The second occurred on 27 November 2012 when the rental rates (all expressed to be "plus GST") took their final form, at the same time as the sale price of the land was significantly reduced. 3. Notwithstanding changes in the rental rates on each of 14 and 27 November 2012, there are two indications in the documentary record that, at least until 21 November 2012, the plaintiff had an expectation that the rent for the first year of the lease would be $150,000. 4. The first is found in a letter dated 15 November 2012 addressed by the plaintiff's auditor (Maher Partners Assurance Pty Limited) to the defendant's bank (the ANZ Bank). That letter was provided by the plaintiff to assuage concerns of the bank about the plaintiff's viability. It included a paragraph in the following terms (with emphasis added): "… [the plaintiff] has previously met interest payments on bank debt of over $3 million, which amounted to in excess of $20,000 per month. We anticipate that a combination of the elimination of this debt, together with reduced outgoings incurred as a result of the reduced footprint of the building being occupied by [the plaintiff], should result in [the plaintiff] being able to meet a rental commitment of $150,000 per annum." 1. The second is found in an email sent by the plaintiff (through Mr Grimshaw) to the defendant (represented by Mr Erceg) on 20 November 2012. The email sent on that date was copied by Mr Grimshaw to the plaintiff's solicitor, Mr Peter Hodges. Uncertain whether Mr Erceg received the email, Mr Grimshaw sent it to him again on 21 November 2012. 2. These emails represented part of the plaintiff's response to a demand on the defendant's side of the record for a re-negotiation of the sale price of the plaintiff's building. In resisting that demand, Mr Grimshaw sought to persuade Mr Erceg that the defendant's return on its investment (at the earlier agreed price of $2.8 million) was a good deal without any reduction in the price. 3. In pressing that case, he made two observations of present interest. 4. One was that the defendant's rental return from the plaintiff for the first year of the lease (with the plaintiff occupying a reduced area within the building) was "$150kPA", leaving the defendant to earn additional rental income from those parts of the building not to be occupied by the plaintiff. 5. The other, as I read it, was an allusion to the possibility that the plaintiff could merge with the Sharkies. In pressing the plaintiff's case, Mr Grimshaw wrote (with emphasis added): "Say you [the defendant] spend $1M upstairs, your potential return (particularly if there is a merge opportunity) would be at least $180kPA (to start with) on a One mill outlay, that's a huge return and one any bank or investor you would think would be ecstatic with…". It is not necessary, here, to explain the precise context of particular figures. What is to be noticed is the reference to "a merge opportunity" affecting the defendant's potential for an investment return. 6. These two observations, together, corroborate the plaintiff's evidence that, to the knowledge of the defendant, it consistently had in mind both a rental base of $150,000 for the first year and that a potential merger of the club with the Sharkies could be commercially beneficial to the defendant. 7. The defendant's demand for a reduction in the sale price emerged on 19-20 November 2012. A valuer charged with preparing a valuation of the building for the defendant's bank (the ANZ) evidently recalled, from a previous assignment, that the building had "structural issues" that, in 2009, had been estimated to require remedial work costing about $300,000. 8. Leaving aside a live contest as to whether this was or was not, truly, a revelation to the defendant, the defendant used the occasion to insist that the price to be paid by it for the building be reduced, by an equivalent amount, from $2.8 million to $2.5 million. 9. These events appear to have been pivotal in the parties' negotiations. They occurred at a critical time, when a notional deadline of 23 November 2012, set by the plaintiff's bank, was fast approaching. The plaintiff was under pressure to clinch a sale. The defendant knew that to be the fact, and pressed home an advantage. 10. Also to be factored in during this time are variations in the amount (and character) of security to be provided by the plaintiff, in favour of the defendant, for rent. This perspective of negotiations reinforces that obtained from a review of the course of negotiations about rent. 11. The memorandum of lease, as executed, provides, in clause 23 (and item 10 of the Reference Schedule at the end of the lease), for the plaintiff, as lessee, to provide a "security deposit" of $75,000 or, in lieu thereof, a charge over its assets, including particularly its Gaming Machines and entitlements to those Machines (being not more than 27 in number). 12. Clause 23 (originally without any itemised reference in the Reference Schedule) underwent a process of change that, as with negotiations about rent, focuses attention on 14 and 27 November 2012. 13. In broad terms, variations in clause 23 in successive drafts of the lease exchanged by the parties' solicitors in the course of negotiations followed the following pattern: 1. the amount of the security deposit (or an equivalent charge) was set at $200,000 in drafts exchanged on 22 and 30 October and 1 and 9 November 2012. 2. the draft lease sent by the defendant's solicitors to the plaintiff's solicitors on 14 November 2012 nominally provided for a security deposit of $200,000 but incorporated provision for an alternative sum of $75,000. 3. the draft lease sent by the plaintiff's solicitors to the defendant's solicitors on 27 November 2012 provided, unequivocally, for a security deposit of $75,000. 4. thereafter, all draft leases exchanged between the solicitors (on 29 November and 4, 5 and 6 December 2012) provided for a security deposit of $75,000 on terms similar to those in the memorandum of lease as executed. 1. An oddity evident in this pattern, to which the plaintiff draws attention, is that, at the very time that the rent for which the memorandum of lease was to provide increased, the amount of the security deposit decreased. 2. An ancillary observation made by the plaintiff is that, in reducing the amount of the security deposit to $75,000, the parties conformed to an industry pattern (acknowledged by Mr Erceg) of establishing a security deposit at a figure representing one half of the annual rental rate, assuming that rate to be (as the plaintiff alleges) $150,000. 3. The reference to a rental rate of $150,000 for the first year of the lease provided for in the draft lease of 14 November 2012 (notwithstanding increased rates for the second and third years of the lease) also focuses attention, in a corroborative way, on the plaintiff's evidence that, during the course of negotiations for the lease, the plaintiff's directors (and auditor) held the view that the plaintiff could cope with rent based upon a first year rate of $150,000 per annum, but could not remain viable if required to start from a higher first year base. 4. Throughout negotiations, Mr Erceg conceded in cross examination, the defendant was aware that the plaintiff had proposed a rental structure of $150,000, $160,000 and $170,000 (initially, inclusive of GST) for the first three years of the lease as the level of rents it could afford to pay. He also conceded that, at least initially, that was a level of rent that he was prepared to accept. 5. Although the plaintiff accepts that the disputed conversation cannot be precisely dated, the documentary record of negotiations between the parties' solicitors is consistent with such a conversation taking place between 14 and 27 November 2012 or thereabouts. 6. During that time, the defendant: (a) increased the proposed rent, by expressing all rent as being "plus GST" rather than "inclusive of GST" and by expressly increasing the rent payable for the second and third years of the lease; (b) committed itself to a reduction of the security deposit; and (c) secured from the plaintiff documentation that not only reduced the price of the building, but also increased the proposed rent, to amounts ultimately reflected in the final, formal documentation of the parties' deal. 7. This happened at about the same time that, as the defendant knew, the plaintiff's directors were scheduled to discuss the lease with the club's solicitors. By an email dated 16 November 2012 the plaintiff's solicitors advised the defendant's solicitors that they would be meeting their "client" (the plaintiff) on the morning of 19 November 2012. On or about the afternoon of the 19th, the defendant's bank appears to have acquired knowledge of the building's "structural issues". On 20 November 2012 the defendant's solicitors wrote to the plaintiff's solicitors, chasing them up, following up the earlier foreshadowed meeting between the plaintiff and its solicitors. That email elicited an immediate response, not from the plaintiff's solicitors, but in the form of Mr Grimshaw's emails of 20-21 November 2012 to Mr Erceg. A short time later, on the afternoon of 21 November 2012, the plaintiff's solicitors sent an email to Mr Grimshaw in which they noted oral advice from him, earlier the same day, that he expected to receive "a revised offer" from the defendant, which, the solicitors anticipated, would be the subject of a telephone conference between them and the plaintiff's board of directors that evening. 8. The Form of the Settlement of the sale/lease back transaction on or about 10 December 2012 is not in dispute. Through solicitors, the sale was effected (in formal terms, with a simultaneous exchange of contracts and completion of the resultant contract) at a price of $2.5 million, on terms that included: 1. execution of the memorandum of lease providing for rental payments of $170,000, $180,000 and $190,000, plus GST, for the first three years of the lease; and 2. deduction from the proceeds of sale of $15,583.33 (by way of a cheque drawn in favour of the defendant), representing payment by the plaintiff of the first month's rent at the rate of $170,000 per annum plus GST (12 x $15,583.33 ≐ $187,000 = $170,000 + 10% GST). 1. That this was the form the transaction took is central to the case in the sense that it grounds the defendant's reliance upon legal rights, and explains the plaintiff's prayers for equitable relief; but its significance to the process of fact-finding is that it marks a shift in focus. 2. Each party focussed on events, subsequent to entry into the lease, said to bear upon whether the oral agreement alleged by the plaintiff to be an integral part of the lease terms (the true agreement between the parties) was, or was not, made. 3. An earlier focus, almost exclusively upon internal management processes of the plaintiff alone, evolved into a focus on the internal management processes of both parties. 4. In large measure that is because: (a) intermingled with the central issue of fact (whether any material oral agreement was made on or before 10 December 2012) were pervasive questions about the credit of principal witnesses; (b) objective evidence, in the form of bank records, clearly established that the plaintiff moved, very quickly after entry into the lease, to ensure that monthly rental payments conformed to the alleged oral agreement rather than the written memorandum of lease; (c) the evidence also established, uncontroversially, a lengthy absence of complaint on the part of the defendant; and (d) the defendant accepted a forensic, evidentiary burden in explanation of its delay in making a complaint. 5. Post-settlement Events. The parties' contentions about post-settlement events traversed a multiplicity of topics, not all of which need elaboration beyond formal notice. In summary: 1. the plaintiff, with justification, points to the transparency of its routine, monthly payments of rent at the rate of $150,000 per annum, plus GST, throughout the first year of the lease. 2. the plaintiff contends, and I accept, that it is unlikely that the plaintiff would, virtually from the outset of the lease term, engage in a deliberate, systematic course of conduct (routinely underpaying rent) that could have, absent the oral agreement for which it contends, put its long term lease in jeopardy. 3. the defendant explains the early absence of any complaint about any underpayments of rent by evidence from Mr Erceg to the effect that: (i) the defendant experienced administrative problems in obtaining bank statements; (ii) Mr Erceg was fully engaged with other work commitments; and (iii) the clarity of the position taken by the plaintiff was obscured from Mr Erceg's view by a rapid deterioration in the relationship between him and Mr Dunning, and by his misplaced reliance on Mr Dunning to make a promised financial contribution to the defendant. 4. the plaintiff points to evidence (including admissions by Mr Erceg) to the effect that Mr Erceg was aware of its systematic "underpayments" of rent (if that be their true character) no later than March 2013. 5. the parties agree that no formal complaint about the plaintiff's pattern of rental payments was made to the plaintiff until early December 2013, at which time Mr Cooper (as the defendant's agent) wrote to the plaintiff two letters (respectively dated 2 and 6 December 2013) which, together: 1. claimed $22,000 (inclusive of GST) as unpaid rent referable to the first year of the lease; 2. claimed $40,556.79 (inclusive of GST) for outgoings for that year; 3. demanded that rent for the forthcoming (second) year of the lease be paid at the rate of $180,000 pa plus GST; and 4. demanded a contribution of $2,802.89 per month for 2014 outgoings. 1. the defendant sought to explain its delays in making a complaint of underpayment of rent by relying upon: (i) the breakdown in the relationship between Mr Erceg and Mr Dunning; (ii) a perceived need on the part of Mr Erceg to wait until he had secured control of the defendant by reaching a settlement with Mr Dunning; (iii) the insistence by Mr Cooper that he have a formal retainer from the defendant before undertaking substantial work; and (iv) Mr Erceg's apprehensions about having any personal dealings with Mr Grimshaw. 2. the plaintiff contends, with justification, that, even if accepted as factually correct, these explanations of delay do not fully explain delay on the part of the defendant (or, more particularly, Mr Erceg) in communicating a complaint: for example, by a solicitor's letter or by a personal communication with Mr Collings (an officer of the plaintiff with whom Mr Erceg enjoyed a reasonable personal relationship). 3. on the plaintiff's case, an impediment to acceptance of Mr Erceg's explanations of delay is his (admitted) awareness, from mid-2013, that any prospect of a merger between the plaintiff and the Sharkies had evaporated, with a consequence that the defendant's investment in the plaintiff's building took on a different hue. 1. Controversy attended the minutes of meetings of the plaintiff's board of directors on 19 November and 10 December 2013. On the whole, it seems to me, the minutes favour the plaintiff's case, notwithstanding the defendant's criticisms. 2. Mr Erceg attended the meeting of 19 November 2013, at which he spoke positively about development of the building, without communicating any complaint about underpayments of rent. He says he spoke to the meeting about the plaintiff's rent rising to $180,000 (under the memorandum of lease) but no such topic is recorded in the minutes, and other witnesses deny that it was raised. I do not accept Mr Erceg's evidence. Had the topic been canvassed, even at the margins of discussion, it would have have lodged itself in the consciousness of directors, and in the terms of the minutes. The directors were acutely conscious of a need to re-establish the plaintiff's financial viability. On Mr Erceg's evidence, he warned them of a $30,000pa increase in the plaintiff's rent. The minutes record nothing of the sort. They record only that Mr Erceg was a bearer of good news. 3. The defendant criticised the terms of the minutes of the board meeting held on 10 December 2013 because of the following entry (under the heading of "General Business"): "R.G & D.W [a reference to Messrs Grimshaw and Wallace] meeting with new property agent Brett Cooper. The discrepancies with the written lease & verbal agreement explained to Board. Meeting to be arranged with owner after Xmas to rectify the situation." 1. The defendant contends that this entry should be read as confirmation that the board (as a whole) required an explanation of the alleged "verbal agreement" because that "agreement" was, in effect, an invention of Mr Grimshaw. That contention does no justice to either Mr Wallace's independent evidence of the "verbal agreement" or the fact that an "explanation" to the board was needed because three new members had only recently joined the board. 2. Read objectively, the minutes are consistent with an expectation of the board, as a whole, that everything would be sorted out after Christmas, when the "owner" (Mr Erceg) could be personally engaged in discussions. 3. The Evidence Weighed. Having viewed the evidence through the prism of surrounding circumstances, I am satisfied that the evidence of Messrs Wallace and Collings (and, implicitly, the evidence of Messrs Grimshaw and Dunning), to the effect that the parties entered the lease on the basis of an agreement as to rent not recorded in the memorandum of lease, should be preferred over the denials of Mr Erceg. 4. Messrs Wallace and Collings, in particular, were reliable witnesses of truth, untainted by any attack on their credit. Conservatively, making due allowance for attacks on the credit of Messrs Grimshaw and Dunning, the fact remains that the evidence of Messrs Wallace and Collings was corroborated by Messrs Grimshaw and Dunning. 5. In the absence of any corroboration of his evidence, my doubts about the credibility of Mr Erceg's testimony remain undisplaced. 6. Viewed objectively, and in their totality, the surrounding events favour acceptance of the plaintiff's evidence over that of the defendant. The absence of contemporaneous, corroborative documentation of events referable to negotiations between 22 October and 10 December 2012 or thereabouts has been sufficiently explained to overcome natural reservations about undocumented commercial dealings. With due allowance being made for Jones v Dunkel inferences, the course of negotiations manifested in successive drafts of the parties contractual arrangements fits more comfortably with the plaintiff's evidence than it does with that of the defendant. 7. The speed, consistency and transparency of the plaintiff's adoption of a pattern of rental payments conforming to its understanding of the true agreement between the parties is not readily gainsaid. It is very unlikely that the plaintiff, having negotiated a long term lease to preserve its club community, would, without any apparent reason, put the whole lease in jeopardy by adoption of a deliberate strategy of underpayment of rent. 8. Whatever sympathy one might have for Mr Erceg in his falling out with Mr Dunning, the reasons offered by him as explanations for delay in communicating to the plaintiff a complaint about alleged underpayments of rent do not measure up. In fact, they appear, at least to some extent, contrived. That appearance is consistent with an attribution to Mr Erceg of an intention to order his dealings with the plaintiff, strategically, so as to place the plaintiff under such commercial pressure that it could be forced to give up its occupancy of the property. 9. The manner in which the defendant's case was conducted before me is not inconsistent with such a conclusion being reached, although, in making findings of fact, I put it to one side. The True Agreement about Rent 1. For these reasons, I find that the true agreement between the parties was that, notwithstanding the express terms of the memorandum of lease, the rent payable by the plaintiff to the defendant during the first three years of the lease (absent a merger of the plaintiff and the Cronulla Sharks Leagues Club) was to be: 1. $150,000 (rather than $170,000) plus GST during the first year. 2. $160,000 (rather than $180,000) plus GST during the second year. 3. $170,000 (rather than $190,000) plus GST during the third year. RELIEF RELATING TO RENT 1. The plaintiff grounds its claim for relief in relation to the parties' dispute about rent on principles governing estoppel and those governing rectification. 2. My finding that the true agreement about the rent payable by the plaintiff to the defendant (absent a merger between the plaintiff the Cronulla Sharks Leagues Club) is that made orally antecedent to the execution of the memorandum of lease invites consideration of: 1. the law of contract, including that relating to collateral contracts and equitable principles governing the rectification of instruments recording a contract; and 2. principles governing estoppel, including promissory estoppel and estoppel by convention. 1. In deference to Hoyt's Pty Limited v Spencer (1919) 27 CLR 133, and the "entire agreement" clauses in the parties' contractual documentation of 10 December 2012, the plaintiff does not suggest that the parties' oral agreement constituted a separate, but collateral contract, consideration for which was entry into the (inconsistently expressed) memorandum of lease. Its case is that there was but one agreement (contract) imperfectly expressed in the memorandum of lease. The rule in Hoyt's v Spencer does not constrain an application for rectification of a written contract (Equuscorp Pty Ltd v HGT Investments Pty Ltd (2004) 218 CLR 472 at 483 [33]) or the operation of the principles governing promissory estoppel (Saleh v Romanous (2010) 79 NSWLR 453 at 459 [52] - 462 [76]) as distinct, possibly, from estoppel by convention (Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 at 195B-196A and other cases noted in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at 646-648). 2. Upon a consideration of the law of contract, in aid of its rectification claim, the plaintiff contends that the true agreement (the contract between the parties, had it been correctly recorded) was that agreed between the parties orally, with the consequence that the memorandum of lease can, and should, be rectified so as to have it constitute a correct record of the contract. 3. The remedy of rectification is available in relation to a lease and, moreover, in some cases, a lease registered as well as (as in this case) a lease registrable under the Real Property Act 1900 NSW: PW Young, C Croft and ML Smith, On Equity (Law Book Co, Sydney, 2009), paragraph [11.260]; Misner v Australian Capital Territory (2000) 146 ACTR 1. 4. The object of an order for rectification of a contract is to have a written record of the contract conform to the terms of the contract, not to vary them: PW Young et al, On Equity, paragraph [11.250]; JD Heydon, MJ Leeming and PG Turner (eds), Meagher, Gummow and Lehane's, Equity Doctrines and Remedies (LexisNexis Butterworths, 5th ed, Sydney, 2015), paragraph [27-010]. 5. In Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350-351, Mason J described the purpose of the remedy as being to make an instrument conform to the true agreement of the contracting parties where their writing, by common mistake (or, in limited circumstances, unilateral mistake) fails to express that agreement accurately. 6. Consistently with the purpose of the remedy of rectification, thus expressed, the concept of "mistake" here discussed focuses essentially upon a "mistake" in the recording of an agreement, a discrepancy between the recorded form and the underlying substance: The Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 at [34] and [38]-[39]. Although similar language may be deployed (with references to "common" and "unilateral" mistakes), this usage differs in concept from substantive principles (such as those discussed in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 and Taylor v Johnson (1983) 151 CLR 422 at 432) bearing upon whether a contract was made or, if made, whether it can be set aside. The remedial (rectification) concept focuses on the existence of a correct record of a contract. The substantive (contractual) concept focuses on the existence and quality of a contract: contractual intent, not mere form. Both concepts may be at play in any given case. 7. I am satisfied that the plaintiff has established, by "clear and convincing proof" (to paraphrase Joscelyn v Nissen [1970] 2 QB 86 at 98 as approved in Pukallus v Cameron (1982) 180 CLR 447 at 452), that "the concurrent intention of the parties" at the time of contract (Slee v Warke (1949) 86 CLR 271 at 280-281; Issa v Berisha [1981] 1 NSWLR 261 at 264) was that the rent payable by the plaintiff (absent a contemplated merger between the plaintiff and the Cronulla Sharks) was that agreed orally rather than that recorded in the memorandum of lease they executed. 8. Given the purpose served by the remedy of rectification as articulated by Mason J, with its focus upon the form of expression of a concurrent intention, I do not regard the parties' purposefully incomplete statement of their agreement in the memorandum of lease as a bar to the availability of the remedy. 9. I am fortified in this view by observations about the rationale of the Court's jurisdiction to order rectification made by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 710 [443] – 713 [458]: exercising equitable jurisdiction, the Court focuses on what is unconscientious for a party to assert about the contract. As explained by his Honour, the rationale of rectification is that it is unconscientious for a party to a contract to seek to apply the contract inconsistently with what he, she or it knows to be the common intention of the parties at the time that the written contract was entered. 10. On my findings about the true agreement between the parties, it is unconscientious for the defendant to assert an entitlement to rent calculated in terms of the unrectified memorandum of lease. 11. In the circumstances of this case, I do not regard the fact that the final form of the parties' contractual documentation emanated from the office of the solicitors for the plaintiff as a bar to rectification: JD Heydon, MJ Leeming and PG Turner (eds), Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5TH ed, 2015), paragraph [27-155]. The party actively promoting the form of memorandum of lease executed by the parties was the defendant. The plaintiff did not act unconscientiously in acquiescing in the defendant's proposal for their documentation. 12. Accepting that the effect of rectification, when granted, is to relate back to the time of execution of a contractual document (Issa v Berisha [1981] 1 NSWLR 261 at 265 A-B), but noting that equitable relief is moulded to accommodate all the circumstances of a case at the time relief is granted in an endeavour to do what is practically just (Valdasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 113-114; Bridgewater v Leahy (1998) 194 CLR 457 at 494), I do not regard it as necessary, in circumstances in which the contemplated merger between the plaintiff and the Cronulla Sharks has completely fallen away, to express an order for rectification in terms that contemplate the now irrelevant arrangement for the payment of a higher rent in the event of a merger. 13. I do not regard the parties' incomplete statement of their agreement in the memorandum as effecting a bar to grant of an order for rectification. The purpose of the jurisdiction exercised by the Court is to make the parties' memorandum conform to their true agreement. I am satisfied that execution of the memorandum in the form in which it was executed was not intended to mislead, and did not mislead, any third party (in particular, the Cronulla Sharks). To deny the remedy of rectification to the plaintiff, if (as I find) it is otherwise available, could be to leave in circulation an instrument of title which, unrectified, could be used as an instrument of fraud, whether the memorandum be registered or not. The fact that it is in registrable form, and the plaintiff seeks an order for specific performance in aid of its registration (Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 247-256) operates in favour of a grant of rectification. 14. Had I not concluded that the remedy of rectification is available to the plaintiff, and best suited to meet the justice of the case, I would have found that the plaintiff is entitled to succeed upon an application of principles governing promissory estoppel. Upon an assumption that rectification is not available, the oral agreement between the parties could reasonably be expressed in negative form, as a representation by the defendant that it would (in the absence of any merger between the plaintiff and the Cronulla Sharks) charge the plaintiff no rent beyond that calculated on the basis of rates of $150,000, $160,000 and $170,000 per annum (plus GST) for the first three years of the lease: Saleh v Romanous (2010) 79 NSWLR 453 at 459-462. The plaintiff plainly relied upon the defendant's agreement in its entry into the sale/lease back transaction at a reduced price for the sale of the land, notwithstanding that its commercial options were fast diminishing under pressure from its bank to reduce its indebtedness to the bank. 15. But for controversy (elaborated in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at 646 [204] - 648 [214]) about whether estoppel by convention is available in relation to pre-contractual assumptions inconsistent with the terms of the contract, I would have found that the plaintiff had established the elements required to be established for the operation of estoppel by convention, taking those elements as having been correctly identified by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC; (2007) Australian Contract Reports 90-255 (89, 904); NSW ConvR 56-172 (56, 205) at [32], as approved by Tyledar Pty Ltd v Euphoric Pty Limited (2007) 69 NSWLR 603 at 645 199]-(201]. On the basis of its oral agreement with the defendant, the plaintiff adopted an assumption as to the terms of its legal relationship with the defendant. The defendant adopted the same assumption, as evidenced, inter alia, by its acquiescence for the better part of a year in the rate of rent paid by the plaintiff. Both parties conducted their relationship on the basis of their oral agreement. Each intended that the other act on that basis. Departure from the parties' oral agreement (assumption) will occasion detriment to the plaintiff. 16. The plaintiff's claim for rectification should be granted, with such consequential orders as may be necessary, including orders designed to have the defendant account for the plaintiff's overpayment of rent during the course of these proceedings. 17. A correct record of the true agreement between the parties could be had by the simple expedient of amending items 4 and 5 of the Reference Schedule to the memorandum of lease by substituting "$150,000" for "$170,000"; "$160,000" for "$180,000"; and "$170,000" for "$190,000". 18. Therein lies the ambit of an order for rectification. 19. At the conclusion of the hearing of the proceedings the parties agreed that, should the Court find in favour of the plaintiff on the controversy about rent, the plaintiff should be found to have made overpayments of rent quantified at $45,833.45 as at 27 March 2015. 20. That figure may require adjustment to accommodate payments made pending publication of this reserved judgment, together with an allowance (under s 100 of the Civil Procedure Act 2005 NSW or otherwise) for pre-judgment interest. OTHER MONEY DISPUTES : OUTGOINGS AND ELECTRICITY Questions in Dispute 1. During the course of the hearing the parties refined their disputes about quantification of their respective rights and obligations concerning the plaintiff's obligation to contribute to the payment of outgoings (lease clause 4.2) and its obligation to pay for electricity (lease clause 4.3). 2. In relation to outgoings, they agree that: 1. the plaintiff's figures about the parties' state of accounts (at the date of the defendant's re-entry and as at the date of trial) are correct if the 2013 outgoings charged to the plaintiff at the rate of 100% were in fact only payable at the rate of 33.33%, and if the defendant was not entitled to charge a monthly sum in advance for outgoings on the basis of disclosure statements dated 6 December 2013 and 20 January 2015; and 2. the defendant's figures are correct if those 2013 outgoings were correctly charged at 100%, and the defendant was entitled to charge a monthly sum in advance on the basis of those disclosure statements. 1. In relation to electricity charges, the parties agree upon the correctness of the plaintiff's figures for the state of the parties' accounts (at the date of re-entry and at the date of trial) as representing refund to the plaintiff of 66.67% of the electricity paid by it in respect of the building, the plaintiff contending that it was only liable for 33.33% of those expenses. However, the defendant says that the plaintiff is entitled to no more than a credit of $1,000 on the electricity account as at the date of re-entry, and no more than a credit of $2,400 as at the date of trial. Outgoings 1. Untimely notification of disclosure statements. The plaintiff's case that the defendant was not entitled to charge a monthly sum in advance for outgoings turns upon the fact that each of the disclosure statements to which both parties refer was "notified" to the plaintiff later than the time ("at least one month before the commencement of [the] Outgoings Year" on 1 January) contemplated by lease clause 4.5(a). 2. The "disclosure statement" for the year commencing on 1 January 2014 and concluding on 31 December 2014 is dated 6 December 2013. It was, I infer, "notified" (by Mr Cooper, on behalf of the defendant, to the plaintiff) on or about, but not earlier than, that date. 3. The "disclosure statement" for the year commencing 1 January 2015 and concluding on 31 December 2015 is dated 20 January 2015. It was not notified (by Mr Cooper, on behalf of the defendant, to the plaintiff) before the date it bears. 4. Upon construction of clause 4.5, the word "will" (found in each subparagraph of the clause), read alone, is equivocal as to whether, to activate the obligation of the Lessee for which clause 4.5(b) provides, notification of a disclosure statement must be within the time limited by a clause 4.5 (a). 5. Several factors lead me to conclude that the obligation for which clause 4.5(b) provides is contingent on a timely compliance with clause 4.5(a) by the Lessor: 1. First, the time requirement stipulated by clause 4.5(a) is introduced by the words "at least", implying that consequences might flow from an untimely notification. 2. Secondly, use of the word "will" in clause 4.5(b) must be taken as imposing an obligation on the Lessee because, if it were otherwise, a lessee might choose not to make outgoings contributions in advance and clause 4.5 would be deprived of utility and purpose. 3. Thirdly, if the word "will" is sufficient to impose an obligation in clause 4.5(b), it should, logically and fairly, be sufficient to impose an obligation in clause 4.5(a). If the Lessor is to activate an obligation in the Lessee under clause 4.5(b), a fair inference from the language of the clause is that it is required to observe the time constraint for which clause 4.5(a) provides, so as to enable the business of the Lessee, and administration of the Lease, to be conducted in an orderly manner. 4. Fourthly, non-compliance by the Lessee with an obligation to pay money for which clause 4.5(b) provides carries significant legal consequences in that, after allowing for a period of 14 days' grace: (i) by virtue of lease clause 14.1(a), it constitutes an event of default entitling the Lessor, under lease clause 14.2, to forfeit the Lease; and (ii) by virtue of lease clause 14.3, it gives rise to an obligation to pay interest. 5. Fifthly, a lessor who does not comply with the time constraint for which clause 4.5(a) provides is not thereby deprived of an entitlement, under lease clause 4.2, to a contribution to outgoings. 6. Sixthly, a fair reading of clause 4 as a whole suggests that, if the Lessor wants to take advantage of the disclosure statement procedure for which clause 4.5 provides, it is incumbent on the Lessor to initiate the procedure, under clause 4.5(a), in a timely way. 1. I conclude, therefore, that the defendant was not entitled to charge the plaintiff a monthly sum in advance for outgoings on the basis of the disclosure statement dated 6 December 2013, and is not entitled to do so on the basis of the disclosure statement dated 20 January 2015. 2. Characterisation of 2013 outgoings charged at 100%. The outgoings charged to the account of the plaintiff, by Mr Cooper's letter dated 2 December 2013, at 100% (rather than the rate of 33.33% for which lease clause 4.2 and Reference Schedule Item 3 provide) are described by Mr Cooper's letter, or accompanying invoices, in terms from which I infer that they related to: 1. service fees for lifts; 2. service fees for air conditioning; 3. a service call for a malfunctioning locking device on an external door; 4. fire alarm and monitoring service fees; 5. a fire safety administration fee charged by Sutherland Council; and 6. a security call service fee. 1. On my reading of clause 4.1, these expenses: (a) fall within subparagraph (a)-(k) of clause 4.1; (b) do not fall within subparagraph (l)-(n) of the clause; and (c) do not attract the operation of so much of paragraph (n) as commences with the word "unless". 2. On my reading of clause 4, clause 4.2 operated to impose on the plaintiff an obligation to pay 33.33% of the contested outgoings. 3. The defendant's argument (not clearly articulated) appears to be based upon a proposition that, as the plaintiff was the only tenant in the Building, it must be taken to have been the only occupant of the Building (ignoring the defendant's implicit occupation of it as owner of the freehold), and, accordingly, it should, in fairness, bear all operational expenses relating to the lifts, air-conditioning, fire safety and security services. 4. In a world of give and take, commercial expediency might have encouraged both parties to a similar conclusion. However, the defendant, having chosen not to inhabit that world, can hardly complain if the plaintiff insists upon observance of the agreed terms. Electricity 1. The parties' dispute about liability, under the lease, for electricity charges is similarly affected by their different perspectives. The plaintiff contends that, in the absence of a meter (contemplated by lease clauses 4.3 and 27.1.3) to measure its separate use of electricity, its liability for the cost of electricity charged to the Building is limited (under lease clauses 4.1 and 4.2) to no more than its standard Contribution of 33.33%. The defendant accepts that no electricity charges have been separately metered, but contends that, save for a nominal concession made by it to allow for its estimate of its own use of electricity in the Building, the plaintiff (as the principal user of electricity in the Building) should bear all the cost of electricity charged to the Building to date. 2. Pending the determination of these proceedings, and the offsetting adjustments in contemplation contingent upon that determination, the plaintiff has hitherto borne 100% of the cost of electricity charged to the Building notwithstanding that, under the lease, it has no entitlement to occupy the whole of the Building. 3. Clause 4.3 has no scope for direct application in resolution of the current dispute because the cost of electricity "consumed in or on the Premises" has not been "separately metered". Indirectly, the clause implicitly directs attention back to clauses 4.1 and 4.2. 4. That the cost of electricity falls within the definition "outgoings" for which clause 4.1 provides can be confirmed by reference to sub paragraphs (a), (f) and (h) of clause 4.1. If paragraph (n) to the clause has any scope for operation it would limit, rather than expand, any liability imposed on the plaintiff under clause 4.2. The plaintiff places no reliance upon it, contending instead that its liability is governed by clause 4.2. 5. In my opinion, upon the proper construction of clauses 4.1, 4.2 and 4.3 (within the factual matrix governing the operation of those clauses), the plaintiff's liability for electricity is set by the lease at 33.33% of the cost of electricity charged to the Building. 6. Correspondence between the parties includes a suggestion, on the defendant's part, that the plaintiff had agreed to bear 100% of the cost of electricity charged to the Building on the basis that the defendant could defer its installation of a meter for measurement of the plaintiff's separate use of electricity until, at a later indeterminate time, renovations to the Building were undertaken. No attempt has been made in the proceedings to establish the existence of such an agreement in fact. 7. Having installed no separate meter as contemplated by clause 4.3, the parties must be taken to have determined, by decision or default, to have their rights and obligations in relation to the cost of electricity determined by clauses 4.1 and 4.2. Relief relating to outgoings and electricity, 1. At the conclusion of the hearing of the proceedings the parties agreed upon a quantification of their respective rights and liabilities (in respect of outgoings and electricity) contingent upon the Court's findings. 2. In light of those findings, the parties can be taken to have agreed that: 1. as at the date of the defendant's purported re-entry (12 April 2014) the plaintiff owed the defendant $24,428.09 for outgoings, but was owed by the defendant $58,502.08 as a reimbursement for its overpayment for electricity, leaving the defendant indebted to the plaintiff for $34,073.99. 2. as at 27 March 2015, the plaintiff owed the defendant $23,596.19 for outgoings, but was entitled to a reimbursement of $82,842.74 from the defendant for its overpayment of electricity charges, leaving the defendant indebted to the plaintiff in the sum of $59,246.55. 1. The significance of these figures, insofar as they relate to the date of re-entry, is that (contrary to an assumption underlying the defendant's assertion of a right to re-enter) the plaintiff had no outstanding, net liability for the payment of money to the defendant. On the findings made on the rent question, it was not in arrears in the payment of rent. Although it was indebted to the defendant for outgoings, that debt, set off against the plaintiff's entitlement to a reimbursement for electricity, must be taken to have been satisfied. The defendant had no entitlement to re-enter the Premises based upon an assertion that the plaintiff owed it money. 2. The figures quantified as at 27 March 2015 may require adjustment to accommodate payments made since that date, together with an allowance (under section 100 of the Civil Procedure Act 2005 NSW or otherwise) for an award of pre-judgment interest in favour of the plaintiff. THE BISTRO 1. In purporting to re-enter the Premises, the defendant did not rely only upon an alleged non-payment of moneys. It also relied upon an alleged breach of lease clause 19.7 in the way the plaintiff's bistro was operated. 2. Both lease clause 14.1(b) and section 129 of the Conveyancing Act 1919 NSW require the defendant to serve a formal "notice of breach of covenant" (specifying its allegation of breach and allowing the plaintiff a reasonable time to remedy any such breach) as a precondition to re-entry. 3. The defendant's "Notice of Breach" (dated 25 February 2014) particularised the alleged breach relating to the bistro in the following terms: "… The Landlord [the defendant] notifies you [the plaintiff] that you are in default of Clause 19 of the Lease in that you have sub-leased or parted with the possession of part of the Premises or granted a concession or licence for the operation of any part of the business which you are permitted to conduct on the Premises without the Landlord's consent in writing, namely that you have sub-let, parted with possession or entered a concession or licence for the operation of the bistro within the Premises ('Transaction'). The Landlord requires you to remedy the breach by providing to the Landlord within a reasonable time after the date of this notice and in any event by no later than fourteen(14) days after the date of service of this notice: (i) a request for the Landlord's consent to the Transaction; (ii) a copy of any document evidencing the Transaction; (iii) Particulars of the identity of the other party to the Transaction; (iv) Particulars of all payments to be made by the other party to the Transaction to you pursuant to the Transaction; (v) A statement of the assets and liabilities of the other party to the Transaction, and if a company, of the directors of the other party to the Transaction; (vi) two trade references for the other party to the Transaction; (vii) Such other information as the Landlord reasonably requires upon receipt of the above mentioned information. 1. There is no substance in this allegation, and never has been. 2. Mr Erceg himself conceded (in cross-examination) that: 1. he was aware that someone was running the plaintiff's bistro when the defendant bought the Building. 2. he never had a problem with any of the people running the plaintiff's bistro. 3. he did not want to know the arrangements the plaintiff had for running the bistro, and he never asked for information about those arrangements. 4. having heard about those arrangements, he was not at all concerned about them. 5. if asked for a formal consent to the plaintiff's arrangements for running the bistro he would give consent "straight away". 1. His only concern was to ensure that the bistro was operated in an efficient manner so as to ensure that premiums for insurance cover (included as part of the outgoings for the Building) could be minimised. 2. Mr Grimshaw was not cross examined on evidence he gave, by affidavit, about the bistro operations. 3. That affidavit included evidence of full disclosure of the bistro operations to Messrs Erceg and Dunning in the course of negotiations for the sales/lease back transaction effected on or about 10 December 2012, and their expressions of satisfaction with arrangements for operation of the bistro. 4. At all material times, before and after 10 December 2012, the plaintiff was the sole owner of the bistro, all its equipment, utensils, furniture and fittings. Those engaged to provide meals did so at their own cost in terms of food and time, but the plaintiff paid for outgoings, electricity, telephone, drink table service staff, gas, removal of rubbish and oil, and replacement and repair of all equipment and utensils. There was no service agreement or lease or any other contract in place for the operation of the bistro. The plaintiff subsidised the bistro for the service of its patrons, and allowed those engaged in the provision of meals via the bistro to retain the proceeds of sales of meals to patrons. At all times, the plaintiff remained the owner and in the possession, custody and control of the bistro. 5. Nothing in the conduct of the bistro involved a breach by the plaintiff of its obligations under lease clause 19.7. Nor was there ever any reasonable foundation for the defendant's allegation to the contrary. WAS THE DEFENDANT ENTITLED TO "RE-ENTER" POSSESSION OF THE PREMISES? 1. On the findings made in this judgment, the defendant had no entitlement to take possession of the Premises, as it purported to do, on 12 April 2014. 2. The defendant had no entitlement to forfeit the plaintiff's lease, with the consequence that the plaintiff has no need of a grant of relief against forfeiture. 3. The defendant entered into possession of the Premises, in effect, as a "trespasser". It remained in possession, at a critical time in the plaintiff's business cycle, and with disruptive effect on the business of the plaintiff, until, on the application of the plaintiff, the Court intervened. 4. The plaintiff's summons (as originally filed on 14 April 2014 and as amended on 26 March 2015) includes claims for damages at law and (by implicit reference to section 68 of the Supreme Court Act 1970 NSW) in equity. 5. Those claims have not been withdrawn; but neither have they been addressed in submissions. 6. Whether (and, if so, to what extent) those claims are, and (in light of the way the proceedings have been conducted) can be, pressed are questions that need to be addressed by the parties before final orders are made. CONCLUSION 1. In substance, the plaintiff has been wholly successful in the proceedings to date. 2. I propose to allow the parties an opportunity to bring in short minutes of orders to give effect to this judgment. 3. Prima facie, the short minutes should include: 1. an order that the Memorandum of Lease be rectified by amendment of items 4 and 5 of the Reference Schedule to the memorandum by substituting "$150,000" for "$170,000"; "$160,000" for "$180,000"; and "$170,000" for "$190,000". 2. An order for delivery up to the Court, for the purpose of rectification, the original and all executed copies of the Memorandum of Lease. 3. an order for the payment of money by the defendant to the plaintiff for adjustments (with an award of pre-judgment interest) referable to rent, outgoings and electricity charges. 4. an order that the defendant's cross summons be dismissed. 5. orders for disposal of the related ("Local Court") proceedings. 1. Prima facie, the defendant should pay the plaintiff's costs of the proceedings. 2. Questions which may call for further submissions are: 1. whether (and, if so, to what extent) consequential orders, in the character of an order for specific performance, an injunction or otherwise, are required to ensure that the plaintiff's entitlement to possession, pursuant to the memorandum of lease, is established and respected. 2. whether the plaintiff has any (and, if so, what) entitlement to damages, or other compensation, beyond adjustment of the parties' accounts for rent, outgoings and electricity. 3. whether the Court should take any (and, if so, what) steps to bring to the attention of any public authority Mr Erceg's allegation of bribery. 1. Yesterday, my attention was drawn by the defendant to the plaintiff's appointment of administrators pursuant to the Corporations Act 2001 Cth, section 436A. On the application of the administrators, at the invitation of the Court, orders were made, under sections 447A and 440D of the Act, to ensure that the proceedings can proceed to judgment unimpeded by placement of the company in administration. I expressly reserve for further consideration any questions arising out of the appointment of administrators. 2. Upon publication of these reasons each party (including the plaintiff and the administrators in their own right) will need to review the landscape. Subject to submissions, I propose to allow a reasonable opportunity for that to be done in an orderly way. I will, if necessary, make further orders under the Corporations Act to facilitate that process. ********** 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. Decision last updated: 12 June 2015