Supreme Court New South Wales Medium Neutral Citation: Bettervale v Warehouse Solutions International (No 3) [2015] NSWSC 1356 Hearing dates: 24 August 2015, 25 August 2015, 26 August 2015, 28 August 2015 and 31 August 2015 Date of orders: 09 September 2015 Decision date: 16 September 2015 Jurisdiction: Equity - Real Property List Before: McDougall J Decision: Plaintiff has judgment for possession against both defendants; orders for withdrawal of caveats; and judgment against first defendant for arrears of rent. Catchwords: LEASES – claim by landlord under a sublease for vacant possession – where subleases over three warehouses contained options to renew – where defendant sublessees claim they exercised that option – failure to exercise option in writing as required by the contract – whether options exercised orally – absence of satisfactory evidence to that effect – where four principal witnesses found to be lacking in credibility – issues of fact to be determined on the probabilities regarded objectively – conclusion that options never exercised ESTOPPEL – whether plaintiff estopped from denying that options had been exercised or that new leases had been entered into – where that case depends upon uncorroborated and unreliable witness evidence – where in any circumstances no detriment – result that no estoppels arise Legislation Cited: Conveyancing Act 1919 (NSW) Cases Cited: Jones v Dunkel (1959) 101 CLR 298 Category: Principal judgment Parties: Bettervale Pty Ltd (Plaintiff) Warehouse Solutions International Pty Ltd (First Defendant) WSI International Pty Ltd (Second Defendant) Representation: Counsel: S A Lawrance (Plaintiff) DR Pritchard SC / A Cornish (Defendants) Solicitors: Arnold Bloch Leibler (Plaintiff) Spinks Eagle Lawyers (First Defendant) File Number(s): 2015/202245 Judgment 1. HIS HONOUR: The plaintiff (Bettervale) is the lessee of premises at 11 Bumborah Point Road, Port Botany ("the premises" or "11 BP Road"). It subleased part of those premises, known as Warehouse 1, to the first defendant (WSI), and other parts of those premises, known as Warehouse 2 and Warehouse 3, to the second defendant (WSII). 2. Bettervale says that each of the subleases has expired by effluxion of time; that it has served on the defendants valid notices to quit; and that it is entitled to possession. 3. The defendants say that they are entitled in equity to new subleases, on a variety of grounds including that they exercised options for renewal in their subleases (or that Bettervale is estopped from denying exercise); or that they entered into fresh agreements for new subleases, effectively on the terms of the options, with Bettervale. The defendant have lodged caveats to protect their asserted interests. Urgent hearing and urgent decision 1. The hearing was brought on in circumstances of some urgency, for reasons that will become apparent. It occupied some five days, from 24 to 31 August 2015. At the conclusion of the hearing, I reserved my decision. 2. After the reasons that follow had been prepared in draft, I notified the parties that I was in a position to deliver brief oral reasons, and to make final orders (subject to hearing the parties on the form of the orders). They acceded to that course. 3. Accordingly, on 9 September 2015, I gave reasons ([2015] NSWSC 1358) that were a summary of what follows and heard argument on the form of orders to be made. I directed the parties to bring in draft orders. 4. On 10 September 2015, I heard further although briefer argument on the form of the orders, and then made final orders. I gave very brief reasons for doing so ([2015]) NSWSC 1351). 5. I said to the parties that I would deliver my detailed reasons as quickly as possible. What follows are those detailed reasons. The real issues in dispute 1. Mr Lawrance of Counsel, who appeared for Bettervale, stated that the real issues in dispute were (slightly reworded): 1. whether Bettervale is estopped from denying that the options were validly exercised; 2. whether Bettervale engaged in misleading or deceptive conduct that caused the defendants to exercise the options other than as prescribed by the subleases; 3. whether the parties entered into new agreements for sublease in 2014 and, if so, whether there is a sufficient memorandum in writing of any of those agreements for the purpose of s 54A of the Conveyancing Act 1919 (NSW); 4. whether WSI was in default of its obligation to pay rent in respect of Warehouse 1 at the time it purported to exercise its option and, if so, whether WSI is entitled to relief against forfeiture. 1. Mr Pritchard of Senior Counsel, who appeared with Mr Cornish of Counsel for WSI and WSII, accepted that the issues stated by Mr Lawrance arose and required decision. However, Mr Pritchard submitted, the following further issues arose on the pleadings: 1. whether Bettervale is estopped from denying that the plaintiff entered into new agreements for lease with each of the defendants. 2. Whether Bettervale is estopped from denying that it would grant new or renewed subleases to each of the defendants. 3. In the event that the Court finds that the parties entered into new agreements for lease in 2014, but considers that those agreements (or any of them) were not the subject of a note or memorandum capable of satisfying the requirements of s.54A of the Conveyancing Act 1919 (NSW), whether those agreements (or any of them) were supported by part performance. 4. The existence and terms of the agreement made in or about August 2012 between WSl and Bettervale. 5. In the event that the Court finds (in the case of either defendant) that there was no new agreement for lease, and that Bettervale was not estopped, whether Bettervale engaged in misleading and deceptive conduct that induced the defendants to remain in the property on a month-to-month lease terminable on one month's notice. 6. What is the appropriate form of relief, including, in the event that the Court is against the defendants with respect to their claims for relief in the form of the declaration or grant of new subleases, whether the defendants should be afforded time to vacate the property in an orderly fashion. 1. Mr Lawrance accepted that the further issues stated by Mr Pritchard did arise, and required decision. Background; the head lease and the subleases Parties 1. Bettervale is a company effectively controlled by Mr Brian Toohey. An entity associated with him owns 93% of the issued shares in Bettervale. Mr Tom Temelkov, or an entity associated with him, holds the remaining shares. 2. The issued shares in WSI are now held by Mr Andrew Costi. He is the son-in-law of the late Mr Terry Panayi, and the nephew-in-law of Mr Terry Panayi's brother Mr Peter Panayi. Mr Peter Panayi is involved with the business of WSI, although he is not a director. Mr Peter Panayi's son Mr Tom Panayi is the General Manager of WSI's business. 3. The shares in WSII are now held equally by Mr Temelkov, Mr Tom Panayi and Mrs Patricia Panayi (the widow of the late Mr Terry Panayi). Mr Temelkov is the sole director of WSII and effectively runs its business, although, I have no doubt, Mr Peter Panayi and Mr Tom Panayi have input into its operations. The head lease 1. On 15 September 2003, Sydney Ports Corporation (now known as "NSW Ports") leased 11 BP Road to WSI for a term of 21 years commencing on 1 September 2003 and expiring on 31 August 2024. That lease (which I will call the head lease) was assigned to Bettervale on 30 September 2014. 2. The head lease provided for a "Further Term" in cl 2.2, and for holding over in cl 2.3. Although the expression "Further Term" gained its meaning from the "Commercial Terms Schedule" forming part of the head lease, and although that schedule said that the "Further Term" was "Nil", the provisions of cl 2.2 are important, for reasons that will become apparent. 3. I set out cls 2.2 and 2.3: 2.2 Further Term The Tenant can renew this Lease for the Further Term only if the Tenant: (a) gives the Landlord a written notice requesting a Lease for the Further Term between 18 months before the Terminating Date and 12 months before the Terminating Date; and (b) is not in breach of a term of this Lease at the date of the notice and the Terminating Date, then the Landlord must grant and the Tenant must accept a lease of the Premises for the Further Term on the same terms as this Lease except: (i) the front page and the Commercial Terms Schedule will be amended to reflect the new term, commencing date, terminating date and options and this option clause will be deleted; (ii) the Rent will be determined as provided in this Lease on the basis that the date of commencement of the Further Term is a Market Review Date; and (iii) the Landlord may update the renewal lease to conform with the Landlord's then current standard lease. 2.3 Holding Over If the Tenant continues to occupy the Premises after the Term with the Landlord's consent then: (a) the Tenant occupies the Premises under a monthly tenancy which either party may end by giving 1 months notice expiring on any day; and (b) this tenancy will be on the same terms as this Lease so far as they apply to a periodic tenancy with Rent being the Rent payable immediately prior to the Terminating Date reviewed as provided in this Lease except that the Landlord may prior to the Terminating Date or subsequently on not less than one month's notice vary the rent. 1. Clause 3 provided for rent and rent reviews. By cl 3.3, there was to be a market review of rent (called a "Market Review") on each "Market Review Date". Those dates (by reference to the Commercial Terms Schedule) were the first of July in the years 2008, 2013, 2018 and 2023. There were definitions of "Market Rent". 2. Clause 3.4 provided, relevantly: 3.4 Dispute Notice and Market Procedure The Market Rent from the Market Review Date will be the amount specified in the Market Review Notice given by the Landlord to the Tenant unless the Tenant gives the Landlord a Dispute Notice within 14 days after service of the Market Review Notice, in which respect time is of the essence. If a Dispute Notice if given in accordance with this clause the following procedure applies. … 1. The various expressions with initial capital letters were defined. Their meanings appears sufficiently from what I have set out. It is not necessary to set out also the definitions. The subleases 1. The subleases for Warehouse 1 and Warehouse 3 were made on 15 October 2009. In each case, the commencement date was agreed to be 1 July 2009 and the term was five years. 2. I do not think that there was any material difference between the wording of those two subleases. Accordingly, in what follows, I quote only from the sublease for Warehouse 1. 3. Clause 1 of the sublease made it clear that the sublease was subject to the terms of the head lease. By cl 2, WSI as sublessee agreed to perform the tenant's covenants in the head lease. I set out cls 1 and 2(a): 1. SUB-LEASE The Sub-Lessor sub-leases to the Sub-Lessee the Demised Premises in its present state and condition but subject to the reservations terms and conditions contained in the Head Lease for the Term commencing on the Commencement Date at the rental and upon the terms and conditions contained in this Sub-Lease. 2. SUB-LESSEE'S COVENANTS The Sub-Lessee convenants with the Sub-Lessor as follows: (a) From the Commencement Date and during the continuance of the Term to pay as when due to the Sub-Lessor the annual rental as defined in Item 7 of the Schedule and observe and perform all the convenants and conditions contained in the Head Lease on the part of the Sub-Lessor to be observed and performed in the same manner and in all respects to the extent that all such conditions are applicable to the Demised Premises and are not excluded or modified by this Sub-Lease and the provision of the Head Lease are incorporated in and regarded as contained in this Sub-Lease; … 1. Clause 3(a) was effectively Bettervale's reciprocal covenant to cl 2(a): 3. SUB-LESSOR COVENANTS The Sub-Lessor covenants with the Sub-Lessee that: (a) The Sub-Lessor will observe and perform each and all the covenants and conditions contained in the Head-Lease to the extent to which those covenants and conditions are not imposed upon the Sub-Lessee by the terms of this Sub-Lease. 1. It appeared to be common ground, that the effect of cls 2(a) and 3(a) was to import into the subleases all the terms of the head lease, subject to specific exclusions and modifications. Mr Lawrance so submitted. Mr Pritchard did not submit to the contrary. In my view, that is the plain meaning and effect of cls 2(a) and 3(a). 2. Clause 6 of the sublease dealt with rent and rent review, and cl 7 dealt with options for renewal. I set out those clauses: 6. RENT AND RENT REVIEW (a) Clauses 3.1A and 3.2 of the Head Lease shall not apply to this Sub-Lease. (b) The annual rent on the commencement of Year 2, Year 3 and Year 4 of the Sub-Lease shall be increased by 2.5% or by the same percentage rate as the annual percentage rate increase, if any, between the Consumer Price Index published immediately prior to the anniversary date of the Sub-Lease, whichever is the greater. (c) The annual rent on the commencement of Year 5 (which date shall be a Market Review Date) of the Sublease shall be Market Rent to be determined in accordance with clauses 3.3, 3.4, 3.5 and 3.6 of the Head lease. 7. FURTHER TERM The conditions contained in Clause 2.2 of the Head-Lease shall apply to any further term as stated in Item 9 of the Schedule of this Sub-Lease except that the words and numerals "18 months" and "12 months" shall be replaced by the words and numerals "6 months" and "3 months" respectively. 1. Clause 11 provided in terms that certain further provisions of the head lease (in addition to those specified in cl 6) should not apply: 11. DELETIONS Clauses 2.1 A, 4.1, 4.2, 7.12, 7.12A, 7.13, 7.14, 17.1-17.8 inclusive and clause 18 (d) of the Head Lease and the paragraph immediately following clause 18(d) shall not apply to this Sub-Lease. 1. By reference to the schedule, the options of renewal were for two further terms, each of five years. 2. The sublease for Warehouse 2 was made between Bettervale as sublessor and WSII as sublessee on 20 August 2010. Its commencement date was agreed to be 15 August 2010, and its term to be four years. The terms of the Warehouse 2 sublease were effectively the same as those of the subleases for Warehouses 1 and 3, with two significant exceptions. First, the Warehouse 2 sublease did not include any provision for market rent review equivalent to cl 6(c) of the other two subleases. Second, it contained a subclause, cl 7(b), not found in the other subleases. That subclause read: (b) It is further provided that the Landlord may request the Tenant to renew the sub-lease for any further term as stated in Item 9 of the Schedule provided that the Sub-Lessor gives the Sub-Lessee written notice requesting that it renew the Sub-lease for such further term between 6 months before the terminating date and 3 months before the terminating date and in all other respects clause 2.2 of the Head-Lease shall apply. 1. As with the other two subleases, the Warehouse 2 sublease contained provision for two further terms each of five years. That renewal provision did include the rent review mechanism imported from cl 2.2(iii) of the head lease. The businesses 1. After WSI assigned the head lease to Bettervale, WSI (then controlled by Mr Toohey) moved into Warehouses 1 and 3. A little later, a company known as International Air Freight Services (IAFS) moved into Warehouse 2. 2. The business conducted by WSI in Warehouses 1 and 3 was that of a free store, or warehouse. In August 2006, WSI (still controlled by Mr Toohey) and Mr Peter Panayi agreed to incorporate a new company to carry on the business of a bonded warehouse at Warehouse 3. That new company was WSII, which from August 2006 took over Warehouse 3 and ran a bonded warehouse business from it. 3. In October 2009, the company through which Mr Toohey held the issued shares in WSI sold them to Mr Terry Panayi and Mr Peter Panayi. At the same time, Bettervale entered into the Warehouse 1 and Warehouse 3 subleases with WSI. 4. In August 2010, IAFS vacated Warehouse 2. Bettervale then entered into the Warehouse 2 sublease with WSII. An application for leave to amend 1. The evidence concluded shortly before lunch on Friday, 28 August 2015. I said to counsel that I proposed to hear submissions on Monday, 31 August 2015. One of the reasons for doing so was that I wished them to consider a tentative view that I had formed as to the credibility (or lack of it) of the principal witnesses of fact. I explained that view to them. 2. When the hearing resumed, Mr Pritchard made an application for leave to amend his client's statements of defence. Some of the applications were uncontroversial, and I gave leave accordingly. However, Mr Lawrance opposed others of the proposed amendments. 3. I start with WSI. The structure of its defence (so far as it is presently relevant) was to allege that: 1. there was an oral agreement for a new lease for WSI made at the "tennis club meeting" (see at [88] and following below) in August 2012; 2. alternatively, WSI gave oral notice of its intention to exercise its option for renewal for sublease 1 and Bettervale expressly accepted that oral notice as sufficient; 3. in the further alternative, Bettervale accepted the oral notice by conduct; 4. in the further alternative, Bettervale is estopped from denying that there was an effective exercise of the option. 1. The amendment that was opposed sought to say that, by reason of the rent review in May 2014 (see at [148] and following below), and by reason of advices that a new lease was being prepared, Bettervale expressly and by conduct agreed to grant WSI a new sublease of Warehouse 1 for a further term of five years on the terms of the existing option. 2. Mr Lawrance accepted that, in so far as this was based only on evidence that had been given (and Mr Pritchard had made it clear that no further evidence was to be adduced), he could meet it in submissions. However, Mr Lawrance submitted, he could well have cross-examined differently had he understood, at the time he conducted his cross-examinations of the relevant witnesses, that it was to be argued that there was a fresh agreement for lease arising from the matters particularised. 3. Mr Pritchard submitted that it was unlikely that there would have been any such further cross-examination, or that it would have added anything to the relevant universe of facts. 4. In my view, in the absence of any explanation for the delay in seeking to amend, the application ought not be granted unless I can be comfortably satisfied that to grant the leave sought would not prejudice Bettervale. I cannot be so satisfied. I accept that Mr Lawrance could well have sought to cross-examine differently, or additionally, in relation to the alleged agreement. 5. Specifically, in my view, Mr Lawrance could well have cross-examined the relevant witnesses of WSI as to their understanding of the events from which the agreement was said to arise. Whilst I accept that subjective understandings are irrelevant to the question of whether, objectively, a contract has come into existence, I think it is at least possible, and in the real world likely, that truthful answers on this area could well have produced admissions inconsistent with the case sought to be argued through the proposed amendment. 6. In relation to WSII, the structure of the relevant paragraph of the defence is slightly different. Nonetheless, one of the amendments sought was to allege the making of an agreement expressly and by conduct arising out of the rent review and the payment of adjusted rent. 7. The case sought to be made by that amendment was that the payment of the adjusted rent was referable to the agreement said to have been made expressly and by conduct. That is certainly a matter on which, in my view, Mr Lawrance would have been entitled to cross-examine Mr Temelkov (and would have done so). 8. In relation to one of the warehouses, there was a slight reduction in rent. In relation to the other, WSII refused to pay the increased rent for some seven months until, in February 2015, it realised that its prospects of gaining a favourable hearing from a court of equity might be harmed if it did not appear to be willing to do equity. I have no doubt that Mr Lawrence would have cross-examined more closely on those matters at least. 9. Thus, in relation to this proposed amendment, there was in my view a very real likelihood of prejudice. 10. The other amendment sought was based on cl 7(b) of the Warehouse 2 sublease. It sought to argue that, by giving the rent increase notice, Bettervale had exercised the right that cl 7(b) gave to the "Landlord" to request the "Tenant" to enter into a fresh lease. It alleged that WSII had accepted that request, and thus that there was an enforceable agreement for lease. 11. There was an obvious question as to whether cl 7(b) of the sublease had the effect suggested. I would not have refused leave for that reason alone. However, again, it is in my view clear that Mr Lawrance would have cross-examined Mr Temelkov in relation to this suggested issue. Specifically, since the purported act of acceptance was payment of the new rents (one a decrease and one an increase), I think it likely that Mr Lawrance would have cross-examined to seek admissions that Mr Temelkov (as the guiding mind of WSII) had no intention in July 2014 and later (up until February 2015 at least) of paying the increased rents. If that were Mr Temelkov's state of mind, it could strengthen the point that refusal to pay the rent demanded could hardly have amounted to acceptance of a "request" constituted, in part at least, by a demand for that increased rent. 12. For those reasons, I rejected the applications for leave to amend, to the extent that they were opposed. The witnesses; credibility 1. Mr Toohey gave evidence for Bettervale. The defendants called Mr Peter Panayi, Mr Tom Panayi, Mr Temelkov and Mr Costi. The principal witnesses of fact – Mr Toohey, Mr Peter Panayi, Mr Tom Panayi and Mr Temelkov – were cross-examined extensively. I have come to the firm conclusion that none of those men ought be accepted as a witness of truth. 2. Mr Toohey, by his own admission, was prepared to tell lies. One occasion when he did so was in June 2014, to Mr Tom Panayi. He did that when Mr Tom Panayi sent him an email asking for "the New Lease Agreement as previously requested". Mr Toohey responded, saying that "lawyers are the hold up"; that he would send it as soon as he had it; and that he was "pushing lawyers now". Each of those statements was false at the time it was made. The lawyers had prepared a lease. Mr Toohey had no intention of sending the draft lease to Mr Tom Panayi at that particular time. And he was not pushing the lawyers to produce the draft. 3. Mr Toohey agreed that the statements were made to fob off Mr Tom Panayi, so as to protect the financial interests of Bettervale. He accepted, reluctantly, that the financial interests of Bettervale were closely aligned with his own interests (because he held 93% of the issued shares in Bettervale). 4. The other occasion on which Mr Toohey is shown to have lied (this time, to Messrs Peter and Tom Panayi, as well as to Mr Temelkov) occurred on 5 May 2014 when he sent emails to them on the topic of rent increases. The email said, among other things: We have had a market assessment done which is in line with recent increases we have had from our landlords on the head lease. 1. Plainly, the emails suggested, and were intended to suggest, that Mr Toohey, or Bettervale, had procured an independent assessment of the market rent for the three warehouses. Equally plainly, he or it had done no such thing. It was Mr Toohey himself who formulated what he thought would be an appropriate figure for the market rent. In my view, Mr Toohey acted in that way in an attempt to give an air of verisimilitude to the new rents that he proposed to demand if the subleases were (to use a neutral term) renewed. He knew, I think, that it was more likely that the recipients of the emails would object if he had been truthful, and said that the new rents were no more than his own estimate of what might be the current market rent. His attempts to explain away what he had said were, in my view, dishonest. 2. There were other problems in Mr Toohey's evidence. I do not propose to go through them all. I do however note one matter. Mr Toohey agreed at the outset of his cross-examination that, in his affidavit in reply, he had been careful to go through the defendants' affidavits and identify and comment on any paragraphs with which he disagreed, and that it would be reasonable to assume that where he did not comment he accepted what they said. Nonetheless, in the course of cross-examination, he sought to disagree with many matters that were put to him that were the subject of paragraphs in the defendants' affidavits on which he had not commented. 3. Mr Lawrance submitted that this was a common problem with affidavits drawn by lawyers for witnesses. Whether or not there is such a common problem, it is not in my view a relevant observation in the present case. It is clear that the affidavits had been very carefully drafted, to identify the paragraphs with which Mr Toohey did not agree, and thus (by exclusion) those on which he did not wish to comment. I do not accept that someone as careful as Mr Toohey was to advance what he perceived to be Bettervale's and his own interests through this litigation would have let slip the opportunity to comment on anything with which he did not agree. 4. In my view, Mr Toohey's attempts in the witness box to change his mind, and take issue with paragraphs which, clearly, he had not hitherto thought were objectionable, were dishonest. 5. Mr Peter Panayi's evidence was marked by inconsistencies, non-responsive answers, and dissembling answers. In my view, he resorted to those mechanisms when he perceived that the truth might not assist his (or the defendants') case. 6. At [88] and following of these reasons, I deal with the "tennis club meeting" that occurred on 13 August 2012 (the tennis club meeting). Mr Peter Panayi's evidence in respect of that meeting sought to suggest that he, or more accurately WSI, had a prior legitimate grievance with Mr Toohey in relation to the sale of shares in WSI from Mr Toohey's company to the Panayi interests. In my view, that evidence was false. It was fabricated in order to suggest that WSI's consistent failure to pay rent on time (or at all) in respect of Warehouse 1 was justified because it had been "dudded" by Mr Toohey. However, as is clear (and I deal with this later), there was no misrepresentation of the financial position. Mr Peter Panayi and his late brother were as much aware of WSI's financial position, at and before the time of sale, as was Mr Toohey. 7. Mr Peter Panayi said in his affidavit that on a number of occasions Mr Toohey had said to him that the WSI business "is making between $40,000.00 and $60,000.00 a month". He was forced to concede that no such words had been said. In my view, he must have known when he swore his affidavit that this aspect of it was false. 8. Mr Temelkov's evidence was no more satisfactory than the evidence of Mr Toohey or of Mr Peter Panayi. It, too, was marked by inconsistencies, retractions, non-responsive answers (on quite an amazing scale) and dissembling. 9. Perhaps the high-water mark of those aspects of Mr Temelkov's evidence came in relation to an email of 12 February 2014 that he had received from Mr Michael Crombie. Mr Crombie was an officer of Colliers International, and apparently responsible for the sale and leasing of industrial properties in the South Sydney area. Colliers International, and in particular Mr Crombie, had had extensive dealings both with Mr Toohey (in relation to the proposed sale of the head lease) and the defendants, in relation to what, I am satisfied, were their searches for alternative premises from 2013 to 2015. In the email, Mr Crombie identified various available properties that might be suitable for WSII's needs. He concluded by saying (his emphasis): The alternative is a pre lease, yet I do not think you have the time for this with your current lease expiry? 1. The subleases for Warehouses 1 and 3 were to expire on 30 June 2014, and the sublease for W2 was to expire on 14 August 2014. 2. Mr Temelkov eventually agreed, as he was bound to do, that he had understood Mr Crombie to be saying that there was no security of tenure, for Warehouses 2 or Warehouse 3, beyond the expiry of their current leases. He accepted, eventually, that Mr Crombie must have formed this view based on information given to him by Mr Toohey. Yet Mr Temelkov did nothing in relation to the options. Instead, he intensified his searches for other premises – as I have said, in my view, for alternative accommodation. 3. If Mr Temelkov's evidence were to be accepted, as at February 2014 he firmly believed that the options for Warehouses 2 and 3 had been exercised (even though the option "window" had not opened in respect of the Warehouse 2 sublease). He believed that WSII had security for the next five years, with further options for renewal. On that version of events, the understanding expressed by Mr Crombie (attributable to Mr Toohey) must have come as a tremendous shock to Mr Temelkov. It was then open to him to rectify the situation, by causing WSII to give written notice of exercise straight away for Warehouse 3, and a few days later for Warehouse 2. He did not do this. Nor did he speak to Mr Toohey, to find out exactly where the misunderstanding (on Mr Temelkov's evidence) had arisen. 4. The whole of Mr Temelkov's cross-examination on this subject, and on the related subjects of his searches for other premises, is unacceptable. In my view, Mr Temelkov is a man who was prepared to fabricate evidence on matters that he perceived as being essential to his company's case. 5. In the course of cross-examination on the email of 12 February 2014, Mr Temelkov said that (as one might expect) he had communicated Mr Crombie's views to Mr Peter Panayi and Mr Tom Panayi. Mr Peter Panayi did not recall any such conversation. I am satisfied that (as he accepted) he would recall such a conversation had it occurred. I shall turn to Mr Tom Panayi's evidence on this topic in a moment. 6. In my view, Mr Temelkov fabricated his evidence of passing on to Messrs Peter and Tom Panayi what Mr Crombie had said. He did so because he understood that, on its face, Mr Crombie's email was damaging to WSII's case. I return to this topic later in these reasons. 7. Dealing with Messrs Toohey, Peter Panayi and Temelkov, I have come to the view that for each man, the principal consideration he had in mind, when giving both affidavit and oral evidence, was expediency. I do not think that any of them was concerned to tell the truth if to do so might (as he perceived it) damage his and his company's financial interests. On the contrary, I think, each of them was prepared to tell the truth only in so far as he saw it as likely to advance his and his company's interests. 8. I should note that, in coming to the view I have just set out, I have had regard both to the entirety of the evidence given and to the way in which it was given, over lengthy cross-examination. I have had regard to matters other than those that I have chosen to highlight above (and, indeed, other than specific matters to which I refer below, in discussing the relevant events). And I have had regard to the demeanour of each, whilst acknowledging that demeanour may be a less than sure guide to veracity. 9. There was evidence that each of Mr Toohey and Mr Peter Panayi suffered, or had suffered, from serious illness. I will not go into the details. The point is that there was no evidence to suggest that the illness from which either of them suffered or had suffered was such as to have any deleterious impact on his memory. In Mr Toohey's case, that suggestion was put to him, and he disagreed. In Mr Peter Panayi's case, there was no evidence at all. 10. I turn to Mr Tom Panayi. He was present in court for the whole of Mr Temelkov's cross-examination. That was a deliberate forensic choice made by Mr Pritchard. Thus, Mr Tom Panayi heard Mr Temelkov's evidence as to (among other things) Mr Crombie's email of 12 February 2014, and the supposed conversations that Mr Temelkov had had with Messrs Peter and Tom Panayi about the sentence quoted above. 11. Mr Tom Panayi gave clear and precise evidence of other conversations, not always of central importance, that he said had occurred. But curiously, when it came to the supposed conversation in which Mr Temelkov (so he said) relayed what Mr Crombie had said and its source, Mr Tom Panayi's memory failed him. He was not prepared to deny that such a conversation had occurred. But neither was he prepared to accept it had occurred. He retreated into a series of answers of the "I don't recall" variety. 12. In my view, Mr Tom Panayi is an intelligent man. In my view, he perceived that to state (as his father was to do) that the conversation had occurred would be damaging to the interests of WSI, but that to deny it had occurred would be damaging to the credibility of Mr Temelkov. Thus, in my view, Mr Tom Panayi dissembled, and stated dishonestly that the did not recall the conversation in question. I have no doubt that, had such a conversation occurred, Mr Tom Panayi would have remembered it: the reasons why are obvious. The contrast between the purported clarity of his recollection on other matters and the asserted failure of memory on this matter is stark. 13. Mr Crombie's email, and the statement from it that I have quoted, are of great importance in the case, because the clear inference from that statement is, as Mr Temelkov was forced to concede, that in Mr Crombie's understanding gained from Mr Toohey, there had been no exercise of any of the options for renewal. In the face of that, the unexplained failure of the defendants thereafter to exercise the options in writing (a course of action then open for two of the warehouse, and shortly to become open for the third) must have been seen by Mr Tom Panayi to be very damaging to the defendants' case. In my view, his willingness to dissemble, and to give false evidence on an issue of central importance, taints his credibility generally. 14. In relation to each of Mr Toohey, Messrs Peter and Tom Panayi and Mr Temelkov, I do not in general accept their evidence except where: 1. it is corroborated by other, acceptable, evidence; 2. it is consistent with contemporaneous documents (which themselves are not likely to have been self-serving); 3. it is consistent with the probabilities, regarded objectively; or 4. it is against interest. 1. I should note that Mr Pritchard submitted that the evidence of the defendants' witnesses gained some force, or credibility, because each of them told substantially the same story. He noted, correctly, that it had not been put to any of those witnesses that he had colluded with the others to concoct his evidence. I do not however accept the submission. 2. Putting it plainly, I do not regard the evidence of one dishonest witness as providing any corroboration for the evidence of another. And in the case of Mr Costi (whom I do not find to have been dishonest), his involvement was so peripheral that it does not provide any meaningful degree of corroboration. To the extent that it does, it is corroboration of self-serving conversations, or observations, made at a time (during 2015) when the defendants were well aware that it was Bettervale's and Mr Toohey's view that their leases had come to an end, and that the options had not been exercised. 3. Mr Costi is of lesser importance in the evidentiary scheme. He was not involved in any of the discussions that are said to have amounted to, or to have included, oral "exercises" of the options. The highest Mr Costi's evidence goes (leaving aside the conversation with which I deal at [111] and following below) is that he attended meetings in 2015, with Mr Toohey and others, in which various proposals for sale or lease were discussed. In the course of those discussions, according to Mr Costi, there were self-serving comments made such as "why are we going to sign these heads of agreement when we have current leases" or "we have a lease already… "or "we have long term leases here". 4. At the time those meetings took place, WSI and its principals were well aware that Bettervale was looking to sell the head lease. In my view, those self-serving statements go nowhere. They were made at a time when the principals of WSI were keenly aware that they had failed to exercise the options either in accordance with their terms or at all. Thus, I do not regard Mr Costi's evidence as providing any relevant corroboration of the evidence of the defendants' other witnesses. Approach to deciding the central questions of fact 1. Mr Pritchard submitted that the force of the defendants' case could be best (indeed, I think, only) appreciated if the various alleged conversations that were said to amount to notifications of exercise of options were viewed in their chronological context, and in the light of such information as could be gained from contemporaneous documents passing between or created by the parties. To that end, Mr Pritchard relied on a chronology called, with disarming simplicity, "Defendants' Objective or Undisputed Facts". Mr Pritchard cross-referenced entries in this document to a detailed written outline of closing submissions that he provided, in which he sought to support or comment on the various matters listed in the chronology. 2. In those detailed submissions, Mr Pritchard identified some nine "central contests of fact" common to the case for each defendant, by reference to which he structured his submissions. They are (slightly reworded and in some cases expanded): 1. oral notices of intention to exercise said to have been given prior to 5 May 2014 (when Mr Toohey sent to the defendants the "market assessment" emails referred to at [28] above); 2. the parties' understanding of the renewal provisions of the subleases; 3. the reasons for sending the "market assessment" emails of 5 May 2014; 4. oral notices of exercise of options thereafter; 5. oral requests for new subleases; 6. the preparation of draft new subleases 7. the failure to issue new subleases; 8. a conversation said to have occurred in November 2014 between Mr Toohey and Mr Temelkov; and 9. the defendants' inspections of other premises. 1. In addition, as to WSI, Mr Pritchard raised as a central dispute of fact, the discussions at, and outcome of, the tennis club meeting in August 2012. 2. The approach that Mr Lawrance took in his submissions was to address individually each of the conversations in which, it was said, oral notice of exercise of the options had been given. Mr Lawrance addressed, separately, the contemporaneous documents. 3. I do not think that Mr Lawrance disputed (or would dispute) the proposition that assessments of what was said, and findings of fact as to what was said, should be undertaken in a vacuum, independently of context including such documents as were exchanged or generated at the time which might help to throw light on the disputes. And indeed, in my view, that is the correct approach to take. Thus, in principle, I accept Mr Pritchard's submission, to the effect that the resolution of the disputes of fact depends critically on placing the disputed conversations in context. I accept, further, that the relevant context includes not only what was happening at the time when the disputed conversation was said to have occurred, but also what happened before and after, to the extent that those prior and subsequent events can be seen to be related to the particular conversation in dispute. 4. Finally, I propose to adopt Mr Pritchard's approach, and to focus on the central disputes of fact. Since it is Mr Pritchard's clients who bear the onus of proof on the questions of exercise of the options, fresh agreements, estoppel and the like, it is in my view appropriate to deal with their cases by reference to what they contend are the relevant factual disputes. 5. I shall start with the tennis club meeting, and then to turn to the common central disputes of fact outlined by Mr Pritchard. The tennis club meeting 1. On 13 August 2012, Mr Peter Panayi and Mr Terry Panayi met Mr Toohey at the Kooyong Tennis Club in Melbourne. WSI was significantly behind in its payments of rental under the Warehouse 1 sublease. The apparent purpose of the meeting was to come to an agreement as to the arrears. 2. Mr Toohey and Mr Peter Panayi gave evidence of what was said at the meeting. Mr Peter Panayi said that, in the course of the tennis club meeting, he had a conversation with Mr Toohey to the following effect (affidavit sworn 13 August 2015, [38], [39]: 38. At that meeting, Brian and I had a conversation: Me: You told us before we bought it that this business was making between 40 and 60 thousand a month when in fact its losing money. You sold us a white elephant. We need a substantial rental reduction for us to continue. Brian: No, I am not changing the rent. 39. We discussed the issue for another 15 minutes or so and Brian said: Brian: Look, I will give you a rental reduction to $75,000.00 a month if you agree now to take up the option in the lease at the same rental. Me: We agree to that. We will definitely be sticking around. What about the arrears? Brian: I can agree to discount them for you. Me: They should be written off, and we should start again fresh. The only reason they exist is because the business wasn't doing anywhere near what you told us. Brian: I can't just write them off, but I can discount them. And, we'll just worry about the current rent for the time being. I won't chase you for the back rent for now. 1. I do not accept that evidence (save as to the agreement to reduce rent). As I have said already, I do not regard Mr Peter Panayi as a witness whose evidence can be relied upon. There is no independent (let alone acceptable) corroboration. On the contrary, as Mr Peter Panayi agreed in cross-examination, Mr Toohey sent an email to him after that meeting. The email is inconsistent with the conversation that Mr Panayi alleges. 2. Confronted with this email in the witness box, Mr Peter Panayi dissembled. He said, first of all, that the email he was shown was not the one he had referred to. However, by reference to the exhibit to his affidavit (specifically, tab 6), I am satisfied that the email he was shown was indeed a copy of the email he referred to in para 40 of his affidavit. Once this had become clear, Mr Peter Panayi sought to dissemble further, suggesting that he had exhibited the wrong email to his affidavit. He was unable to say what was the correct email to which he referred, and no other email of 13 August 2012, that could answer the description given in para 40 of the affidavit, was proved. 3. In my view, Mr Peter Panayi realised that the email was inconsistent with his sworn evidence. He sought to dissemble, when the email was put to him. And when it became clear that the email put to him was indeed the email to which he had referred in his affidavit, he fabricated the suggestion that he had exhibited the wrong email. 4. I think that the best evidence of what was said and agreed at the meeting is to be found in the email just referred to. That was an email Mr Toohey sent to Bettervale's in-house accountant, Ms Joyce Lam, on 13 August 2012, and thereafter copied to Mr Peter Panayi. That email stated: Terry and Peter, this is the basic level of our Agreement today. Bettervale will credit Warehouse Solutions International Pty Ltd (WSI) with the difference in rent (not Outgoings) for the period since they have been paying $65k (including GST). They continue to pay that rent of $65,000 plus outgoings plus outgoings [sic] until the end of their lease period (30th June 2014). The credits are conditional upon 1. Peter and Terry Panayi get an agreement by 1st of September 2012 whereby WSI International Pty Ltd (WSII) will pay for a minimum of 1500 sqm and a max of 2000 sqm of warehouse 1 which WSI leases from Bettervale. 2. The rent of the above aforementioned 1500 to 2000 sqm is paid at the full value of the current lease held by WSI ($132.69 psm per month plus GST) and paid directly to Bettervale Pty Ltd by WSI on 1st week of each month beginning on the 1st of September 2012 and ending on. 3. WSI pay their newly discounted monthly rent ($65,000 including GST) by the 20th of each month up to the December 2012 and thereafter in the first week of each month until a new lease is agreed and signed beginning 1st of July 2014 after which the non discounted rent of the current lease applies. 4. WSII pay rent directly to WSI for the period and beyond (01/07/2015) on the understanding that all rent received by WSII to WSI (FOR THE MIN 1500SQM AND MAX 200 [sic] SQM) be paid directly to Bettervale Pty Ltd until all the lease arrears of WSI to Bettervale are paid in full. 5. If for any reason any of the above conditions and undertakings are not completed and adhered to in full, all monies owed to Bettervale by WSI revert to the non discounted rate as per the original 5 year lease of WSI which ends in June 30th 2014. 6. That the directors of WSI give their full personal guarantees to the terms of this agreement. REPAYMENT PROGRAME: AFTER ORIGINAL CREDIT AND ASSUMPTION WSI CONTINUES TO PAY & MAINTAIN RENT OF $65,000 Including GST Plus OUTGOINGS AND RESIGNS A LEASE AT CURRENT LEASE CONDITIONS in 2014. 1. The email may have been sent also to Mr Terry Panayi (I say this because one of the email addresses of the addressees is terry.snr@aamac.com.au). Mr Peter Panayi did not reply to the email controverting that it did indeed set out "the basic level of our Agreement today". Nor, if it were sent to him, did Mr Terry Panayi do so. 2. In my view, the email of 13 August 2012 should be accepted as an accurate statement, or at least summary, of what was discussed and agreed at the tennis club meeting. To the extent that Mr Peter Panayi's evidence goes further, I do not accept it. 3. The topic of rent was also the subject of an email from a Mr John Harrower of WSI to Messrs Toohey, Peter Panayi and Terry Panayi dated 26 October 2012. Mr Harrower was the General Manager of WSI's business, appointed to that position by the Panayi brothers. 4. Mr Harrower's email said (omitting formal parts): Hi Brian, Based on the figures below from Joyce Lam – less payments made to date and then taking into account the credits agreed at the meeting in Melbourne with Peter & Terry Panayi, we believe $402,064.21 is the balance owing Owing as per below $656,332.88 Less paid to 26/10/12 $ 75,000.00 Less credit as agreed in Melbourne 4 months x $25,609.81 $102,439.24 Less credit for post Melbourne meeting to date 3 months x $25,609.81 $ 76,829.43 Less total paid + Credits $254,268.67 Balance owing $402,064.21 Please confirm Regards John 1. Mr Toohey replied later on the same day, in the following terms: I will agree to this amount as long as we have an agreement in writing, that the amount outstanding is supported by the various family trusts and assets of Panayi families. I also want the latest financials of the various Panayi trusts which are currently guaranteeing the lease. Once these are all in order I will draw up an agreements [sic] with above conditions and that WSI will pay an adjusted rent of $75,000 per month including all outgoings but plus GST which can be offset by your BAS and has a neutral cash effect and WSI pays one months rent in advance as a security deposit, and failure to pay rent by the 20th of each month will result in an immediate default notice on the lease. This agreement would be applicable only until the current lease period is complete and the rent is renegotiated. please agree to all this and I will prepare the paperwork and credits accordingly. This is a one off offer and non negotiable… you have 5 working days to reply. 1. I do not understand how the figure of $65,000.00 referred to in the email of 13 August 2012 morphed into the figure of $75,000.00 referred to in Mr Toohey's email of 26 October 2012. Regardless, the position is that, thereafter, Bettervale invoiced WSI for $82,500.00 per month (including GST), apparently without any protest (although, as will become clear, WSI continued to be inattentive to and tardy in payment). 2. The excuse given by Mr Peter Panayi for not paying rent was that Mr Toohey had misrepresented the profitability of WSI when he offered its shares for sale to the Panayi brothers. I do not accept that evidence. Although my view of Mr Toohey's commercial morality is such that I think that he would not hesitate to make such a misrepresentation if it would suit him to do so, the simple fact is that Mr Harrower had explained the true financial position of WSI to the Panayi brothers and to Mr Toohey well before the sale took place. I think that Mr Panayi's "reason" for not paying rent was fabricated, and dishonestly so; and that it was done to justify what, Mr Panayi well appreciated, would otherwise be damaging to WSI's case. 3. Whilst I am talking of those matters, I should record that Mr Peter Panayi agreed in cross-examination that WSI would pay the admitted arrears of rent only if its claim to be entitled to a renewed sublease were vindicated, and orders made in its favour accordingly, but not otherwise. I do not regard that conditional approach to the performance of admitted obligations as reflecting a standard of commercial morality that would justify this Court's intervening to give equitable relief to the company, WSI, whose stance was so represented. Conversations prior to May 2014 concerning renewal of leases 1. Mr Temelkov said in his affidavit that he had one or two conversations with Mr Toohey in late 2013 concerning renewal of the subleases. He said that in that or those conversations, in answer to a question from Mr Toohey about WSII's intentions, he said (in effect) that WSII "of course" intended to stay as a tenant after its sublease expired. 2. Mr Toohey denied that there had been such conversations. He said (correctly) that Bettervale had received from NSW Ports a letter dated 4 October 2013, notifying Bettervale of substantial increases in rent under the head lease. Mr Toohey said, and in this respect I accept his evidence, that he was concerned that if the head lessor could not be dissuaded from imposing those increases, Bettervale might not be able to pay them, because it might not be able to recover the increased rents from the sublessees. This aspect of Mr Toohey's evidence is credible, because as I have pointed out already, WSI had been a bad tenant, which required a reduction in rental and which in any event remained in substantial arrears. The emails and events to which I refer at [154] and following below support acceptance of this part of Mr Toohey's evidence. 3. Mr Toohey said, and again I accept, that after October 2013, he began to think about selling the head lease. Thus, at least after October 2013, it was a matter of some importance to Mr Toohey to know whether the defendants would exercise their options for renewal. It is thus likely that he sought to make some inquiries about their intentions. 4. Mr Toohey said that, up to and during what he understood to be the option "windows", he was very concerned to avoid mentioning the question of renewal. He said, in effect, that he had formed the view that it would be better to sell the head lease unencumbered by subleases, and thus was hoping that the sublessees would not exercise their options for renewal. 5. This last aspect of Mr Toohey's evidence is totally unsatisfactory. He was cross-examined on it. He said, contrary to what he had put in his affidavit, that in his view, the price that he might receive for the head lease would be the same whether or not it was encumbered by further subleases. To my mind, that evidence was dishonest. 6. However, and returning to the conversations asserted by Mr Temelkov, the fact is that Mr Toohey was concerned to know, late in 2013, what were the defendants' intentions with regard to renewal of their subleases. Thus, I think, it is likely that he might have made some inquiries about the topic. In turn, I think, it is likely that a conversation or conversations, of the kind to which Mr Temelkov deposed in his affidavit, may well have taken place after 4 October 2013. However, for present purposes, the point is that, putting matters at their highest, the conversation went no further than (quoting from [83] of Mr Temelkov's affidavit sworn 11 August 2015): Brian: Do you intend to stay on with your leases after they expire? Me: Yes, of course we do. 1. A conversation in those terms could be taken as a statement of intention, in due course, to exercise the options for renewal when it was possible (in terms of the relevant provisions of the subleases) to do so. It could not amount to notice of exercise, having regard both to the terms of the conversation as alleged by Mr Temelkov and to the fact that there was, at the time, no legal ability to exercise the options. 2. Mr Peter Panayi said that he had a conversation with Mr Toohey in January 2014 in which he confirmed that both companies would be "taking up" their options. He said that Mr Toohey agreed to provide fresh subleases when the time came. Mr Toohey denied that conversation. 3. The conversation is not reflected in any contemporaneous document (whether or not exchanged between the parties). Given Mr Peter Panayi's expressed view, that the question of renewal had been dealt with as long ago as August 2012 at the tennis club meeting, there was no particular reason for him to revert to the topic in early 2014. In the absence of any corroboration or consistency with the probabilities, objectively regarded, I do not accept this aspect of Mr Peter Panayi's evidence. I do not find that the asserted conversation took place. 4. Mr Costi said that he had a meeting with Mr Toohey (and Mr Tom Panayi) at a time which he could not recall but "believe[d]… was 2014" (affidavit sworn 13 August 2015, at [12]). According to Mr Costi, the conversation was to the following effect: Brian: "How do you fit in here?" Me: I am Terry's son in law and Tom is Peter's son, we want [sic] assure you that we are committed to staying here so it is going to be business as usual, we are the next generation, we are in our 40's so we have 20 years working life left and we want to stay." Tom Panayi: "Anything to do with rent or leases I am the point of contact, you can talk to me or my dad". Brian: "I am totally over being a landlord, if you guys are interested in buying I am looking at renegotiating another lease with the Port". Tom Panayi: "We would be interested at the right price". Brian: "I would consider vendor finance". 1. Mr Tom Panayi did not give any evidence of such a conversation in his affidavit sworn 12 August 2015. Mr Toohey denied it had occurred. 2. There is no contemporaneous document consistent with there having been such a meeting, or reflecting what Mr Costi alleged was said. In those circumstances, and bearing in mind that Mr Tom Panayi, who was said to have been at the meeting, did not given evidence of it, I do not regard this aspect of Mr Costi's evidence as credible. 3. I have no doubt that, after the death of Mr Terry Panayi, Mr Costi did introduce himself formally to Mr Toohey. I have no doubt that they discussed Mr Costi's role in the business of WSI. I have no doubt that Mr Costi, in the course of some such discussion, may have said words to the effect that he and Mr Tom Panayi (and, for that matter, Mr Temelkov) saw the businesses as important to their long-term futures. However, it could not be contended that, even on Mr Costi's account of the conversation, there was any statement of desire or intention to exercise the options for renewal, let alone a statement (ineffective, because oral) of exercise. 4. Mr Temelkov gave evidence of conversations with Mr Toohey in about February and March 2014. On Mr Temelkov's dating of those conversations, they occurred within the option windows for each of the subleases. 5. According to Mr Temelkov, those conversations were to the following effect: 1. conversation of late February or early March 2014 (affidavit, [85]): Brian: We are going to put up your rental and the rental for Warehouse Solutions International. I can't keep subsidising the rental and the Panayi's [sic] are behind in the rental Me: Sort it out with them. That's not my issue Brian: Well, your own rent is your issue and that needs to be raised, as you are due to have your leases renewed. Me: Of course, we want our leases renewed, but I am not sure about any rent increase. 1. Conversation in mid-March (affidavit, [89]): Me: Brian, as I said, we do want to stay on here, so can we work out the rental situation for the new leases Brian: OK, we will send something through to you. 1. In between those conversations, Mr Temelkov said, he asked his (or WSII's) accountant Mr Joe Zhou to "check the leases to see what they say about rent increases when we renew". Thereafter, Mr Temelkov said, he and Mr Panayi reviewed the subleases "to see what they said about rental increases" and he "saw that there were provisions for rent review in both and a market review in one of them". It is not credible that they could have reviewed the rent review provisions but overlooked the adjacent renewal provisions. 2. In those circumstances, I do not accept that, having had the benefit of Mr Zhou's advice and having carried out his own review in conjunction with Mr Tom Panayi, Mr Temelkov would not have understood precisely what the renewal provisions required by way of notice of exercise of option. That is particularly significant bearing in mind that the conversations to which Mr Temelkov deposed are said to have occurred within 2 to 4 weeks after he received Mr Crombie's email of 12 February 2014, including the statement as to expiry of the subleases set out at [62] above. 3. In his reply affidavit, Mr Toohey agreed that he had a conversation with Mr Temelkov in late February or early March 2014. He said that he (Mr Toohey) said words to the effect that he was going to put up the rentals, and could not keep subsidising them. He denied the balance of the conversation, and he denied the (second) conversation said to have taken place in mid March 2014. 4. Mr Toohey's oral evidence on this point was different. He denied that there had been a conversation, even to the limited effect admitted in his affidavit, in late February or early March 2014 (T42.15-.25). When shown his affidavit, he was forced to retract that denial (T43.46-.48). However, he then, as it were, retracted the retraction, before retracting the retraction of the retraction (T43.50-44.40). That passage in his cross-examination did nothing to enhance my view of his veracity or credibility. 5. I think that there was some conversation, or were some conversations, between Messrs Temelkov and Toohey between late February and mid March 2014. I find that Mr Toohey did tell Mr Temelkov that Bettervale proposed to increase the rents on the warehouses, and that it could not afford to continue to subsidise the sublessees. However, I do not find that Mr Temelkov gave any unequivocal notice of exercise of the options for renewal as to warehouses 2 and 3. 6. I find that, by mid March 2014 at the latest, Mr Temelkov had reviewed, and understood, the provisions of the subleases for Warehouses 2 and 3 relating to increase of rental. I find, further, that by then (and indeed, as I have said before, at earlier times) he had read and understood the renewal provisions of those subleases. Certainly, by mid March 2014, Mr Temelkov was (as I find) aware that the option windows for each of those subleases was still open, and that, for there to be an effective exercise of option, written notice must be given before the applicable window closed. 7. However, I find, Mr Temelkov was not prepared to commit WSII unequivocally to renew the subleases without knowing what the increased rental would be. He was, I find, aware that the rental for Warehouses 2 and 3 could be increased by way of market rent review on renewal. He was, I find, concerned to ensure that any increase was acceptable. Accordingly, I find, he was not prepared to commit WSII without a full understanding of the monetary aspects of that commitment. 8. Thus, in my view, although it is likely that there was a second conversation, and likely that Mr Temelkov did ask for an indication of what the new rentals would be, that was done to enable him to decide whether or not to exercise the option for renewal. 9. Further, to my mind, even accepting Mr Temelkov's account of the conversation at face value (and, having regard to my opinion of his veracity and credibility, that is not something lightly to be done), it cannot be regarded as notice, let alone unequivocal notice, of exercise of either of the options. Put in context, and informed by my findings as to Mr Temelkov's state of mind, it was part of a process of negotiation designed to elicit from Mr Toohey a statement of what the new rents would be. 10. I repeat that the context for these conversations include Mr Crombie's email of 12 February 2014. I repeat what I have said at [64] above as to Mr Temelkov's understanding of the relevant sentence in that email. I repeat that, by mid March 2014, Mr Temelkov was well aware not only of the rental review provisions in the subleases but also of the renewal provisions. It is inconceivable, in those circumstances, that if Mr Temelkov had wished unequivocally and clearly to commit WSII to exercise of the options for renewal, he would have done it in the informal and equivocal language that, on his own account, was used in the conversations. It is inconceivable that he would have done anything other than give express written notice of exercise. 11. The context includes also the matters I deal with at [262] and following below, relating to inspection of other premises. In my view, Mr Temelkov was doing what a prudent businessman would in this situation. He was considering whether to stay or whether to move. Obviously, the rent if he were to stay would be a key element in his consideration. 12. I have spent some time on this conversation because it is to my mind a very important matter of background to consider when dealing with two of the key matters of fact on which Mr Pritchard depended: Mr Toohey's emails of 5 May 2014, and the subsequent instruction that he caused to be given to Bettervale's solicitors to prepare new subleases. The correct characterisation and understanding of those events is crucial to the defendants' cases. 13. Mr Tom Panayi gave affidavit evidence of conversations that he claimed to have had with Mr Toohey in March 2014, "chasing up… the new leases for WSI and [WSII]" (affidavit, [31] to [34]). I set out those paragraphs: 31. Shortly after having this conversation [see at [132] below] with Peter, I received a call from Brian and had a conversation that included the following: Me: Dad has asked me to chase you up, as we want the new leases for WSI and warehouse solutions [sic]. Brian: I am getting them prepared now, but when are going catch up with the rent. Me: I am working on that, but we want to get our new leases that you promised. Brian: You will be getting a rental increase and I will be sending you an email about that. Me: Ok send it through and we will look at it, but the leases are already agreed so please send it through. Brian: The new rent will be non-negotiable just so you know. Me: Ok send the leases through. 32. I was speaking to Brian again a few weeks after this phone call and I said: Me: Brian my father is chasing me up to get the new leases. What's going on? Brian: I'll get them to you – but what are we going to do about the rent situation? It's causing me real problems. I need to pay Sydney Ports. I need to see it fixed up. Me: I'm still working on it. I'm doing my best to get it sorted out as soon as. 33. A week or so later, I still had heard nothing from Brian. I telephoned him and said: Me: Brian, my dad is getting very upset about you not sending me the new leases, he says that you agreed to this already now please send them through. 34. I recall that Brian again mentioned issues to do with rental in the course of this conversation, but I do not now recall what was said. 1. Mr Toohey denied that any of those conversations occurred. 2. I do not accept Mr Tom Panayi's evidence of those conversations. They are not corroborated in any way. They are not consistent with the probabilities, objectively regarded. On the contrary, in my view, they are inconsistent with those probabilities. I shall explain why. 3. The starting point is that Mr Tom Panayi claims to have been inspired, to have these conversations, by discussions with his father in which his father said in effect that he had "spoken to Brian and confirmed that we are taking up our options for both the bond store and the free store. We agreed we would take the option for the free store when your uncle and me went down to Melbourne to meet with Brian". Mr Peter Panayi had given similar evidence of such conversations. That evidence was admitted (regardless of its source) to prove communication, but not the truth, of the asserted facts. 4. Mr Peter Panayi could not truthfully have had such a conversation with his son. First, on my findings, there was no conversation between Mr Peter Panayi and Mr Toohey in which Mr Peter Panayi confirmed that the companies were taking up their options. Second, and perhaps more important, it is self-evident from Mr Toohey's email of 13 August 2012 (and the absence of any reply to it) that there was no agreement reached in Melbourne, as Mr Peter Panayi is said to have asserted to his son. 5. In my view, the evidence that each of Mr Peter Panayi and Mr Tom Panayi gave about those supposed conversations was dishonest. 6. Next, as a matter of context, Mr Tom Panayi agreed that he had met Mr Toohey for the first time at the funeral of Mr Terry Panayi in February 2013. Although Mr Tom Panayi said that he had had some discussions with Mr Toohey about rental arrears thereafter, it is plain from a subsequent email that, at the time these conversations were said to have taken place, the two men were not on terms of any familiarity. 7. On 8 July 2014, Mr Tom Panayi sent Mr Toohey an email which included the following: Hi Brian, Hope you are well. I know over the years you have always discussed matters with either my father, my late Uncle Terry or Tom Temelkov. We have also briefly met in person but haven't had the chance to chat. I would like to organise a meeting to discuss the recent rent increases and also other matters that need to be addressed. I suggest the meeting to take place her in Sydney. Please let me know when you are available. 1. It is, to put it mildly, unlikely that Mr Tom Panayi would have written to Mr Toohey in those terms, effectively introducing himself, if they had had the conversations to which Mr Tom Panayi deposed at [31] to [33] of his affidavit. 2. The other relevant matter of context is that Mr Tom Panayi sent no email following up the supposed oral requests until 5 June 2014. According to Mr Tom Panayi, he had told Mr Toohey that Mr Peter Panayi was "getting very upset about you not sending me the new leases… that you agreed to… already". It is simply not credible that, if Mr Tom Panayi were truly reflecting his father's state of mind, he would have waited for the best part of a month before sending any email following up the asserted verbal request. 3. The first such email, sent on 5 June 2014, simply asked Mr Toohey to "send me the new lease agreement for W1". There being no reply, Mr Tom Panayi sent a further email 20 days later, on 25 June 2014, forwarding the earlier email and asking "please send lease agreement as per below email". 4. On 1 July 2014, Ms Joyce Lam (the office accountant for Mr Toohey's business interests) sent an email to Messrs Peter and Tom Panayi attaching an invoice "for July 2014 rent and outgoing [sic]". Mr Tom Panayi replied: Please send through the New Lease Agreement as previously requested, so we can allow our legal team to peruse". 1. It will be noted that although Mr Panayi's two later emails referred to previous requests – in context, those in the emails of 5 and 25 June 2014 – none of the emails made reference to any conversation said to have occurred in March or April or thereabouts, or at any time prior to 5 June 2014. Nor did any of those emails make any reference to anyone being "very upset" about the asserted delay in providing the new subleases. 2. Taking all those matters into account, and my view of Mr Tom Panayi's credibility, I do not find that these conversations occurred. 3. It should be noted that while all this was happening, Mr Toohey sent emails to Messrs Peter and Tom Panayi requiring payment of rental arrears. Those emails were sent on 3 March and 1 May 2014. It appears that Mr Tom Panayi replied to the second only of these emails, giving the excuse of slow payment to WSI and promising to make further payments on account of the arrears. He said nothing about the supposed request for new subleases. The parties' knowledge of the rent review provisions in the subleases 1. Each of the principal witnesses of fact (Messrs Toohey, Peter Panayi, Tom Panayi and Temelkov) pretended that he was ignorant of the precise terms of the options in the early part of 2014. Indeed, the defendants' witnesses suggested that they did not become aware of those matters until about May 2014. I regard that evidence as being, in each case, dishonest. 2. Mr Toohey said that he reviewed the head lease and the subleases once he had received the NSW Ports' letter of 4 October 2013. It is inconceivable that he could have missed the option provisions in that review, particularly bearing in mind his admitted general familiarity with the topic of commercial leases. 3. As to Messrs Peter and Tom Panayi and Mr Temelkov, it is equally inconceivable that they proceeded in a state of ignorance, over the five or four years of the initial terms of the subleases, as to what they had to do to renew them. Each of them sought to give the impression that the total duration of the term (15 or 14 years, including both options) was a matter of great importance to him and to his company's business. Each of them struck me as an intelligent and experienced businessman. The provisions of the subleases – specifically, the renewal provisions – are not complex. I do not accept that each of those men failed to look at the renewal provisions at a time when, according to each, he was keenly interested in the topic of renewal, and very keen to indicate his company's desire to renew to Mr Toohey. 4. I am satisfied that, well before May 2014, each of Mr Toohey, Mr Temelkov, and Mr Tom Panayi, understood the renewal provisions in the subleases. The reasons for this conclusion are: 1. at a level of generality, I think it is highly unlikely that experienced and intelligent businessmen, such as each of the principal actors appeared to me to be, would not have satisfied themselves of the salient provisions of the subleases. From Bettervale's perspective, the subleases, and particularly the options for renewal, were fundamental to its ability to deal with the head lease. From the defendants' perspectives, the subleases provided the premises from which they carried on their business activities. I accept, of course, that the defendants could have sought other premises (and in my view, for reasons to which I shall come, that is precisely what they did from at least early 2014, and more likely early 2013). However, security of tenure remained central to their business interests. 2. At a more particular level, I am satisfied that Mr Toohey gained an understanding of the renewal provisions when he reviewed the head lease and the subleases after receiving NSW Port's letter of 4 October 2013. It is not credible that he could have read and considered the market review provisions in isolation, without noticing the closely adjacent renewal provisions (and, of course, the obvious connection between them). 3. As to Mr Tom Panayi and Mr Temelkov, that knowledge came, at the latest, when (as I have found) they reviewed the subleases, as Mr Temelkov said they did, a short time after the conversations between Messrs Temelkov and Toohey in February and March 2014. 4. There is no direct evidence of Mr Peter Panayi's having carried out any review of the subleases. Nonetheless, for the reasons I have given, I do not accept that he would not have done so. And, further, I think it more rather than less likely, given the way that the Panayi family and Mr Temelkov conducted the two businesses, that Mr Peter Panayi would have been kept up to date with, among other things, the conversations between Mr Temelkov and Mr Toohey in late February and early March 2014, and the review exercise undertaken by Mr Temelkov and Mr Tom Panayi thereafter. The May 2014 market assessment emails What the emails said 1. On 5 May 2014, Mr Toohey sent emails to Messrs Temelkov, Peter Panayi and Tom Panayi. One related to WSII and Warehouses 2 and 3. The other related to WSI and Warehouse 1. 2. I set out in full the text (omitting formal parts, salutations and the like) of the former email: as per your lease arrangements, the market rent adjustment is due on 1st of July 2014. There has been considerable increase on rental prices for properties in the Port Botany area. We have had a market assessment done which is in line with recent increases we have had from our landlords on the head lease. We have received notice of increased rent in excess of 50%. WSII has enjoyed discounted rates for the last few years, especially for warehouse 2 and the new proposed rentals are still below what is available for this property in the current market for warehouse space. We also draw your attention to the fact that the increases do not take into account that you enjoy the use of hardstand and hardstand storage areas free of charge. We have not seen fit to increase our rentals to maximum market rental for the site, but believe the new market rents were propose in the attached document to be fair and reasonable under the circumstances. The new rents will be effective from July 1st 2014. 1. The underlining and italics are mine. The words underlined do not appear in the email sent to Mr Peter Panayi and others concerning the proposed new rent for Warehouse 1. Nor do the italicised words, but the changed wording is not significant. Otherwise, the two emails are, substantively at least, identical. 2. There were two spreadsheets attached to the first (WSII) email: one for each warehouse. They showed (split up by reference to various uses) the proposed rate and the current rate for that warehouse, and the increase (decrease). For Warehouse 2, the increase was $111,333.55, or about 17% of the current rent of $643,676.45. For Warehouse 3, there was a small decrease, of $2,328.38 on the current rent of $564,717.38. 3. There was a similar spreadsheet attached to the second (WSI) email. It showed that, for Warehouse 1, the increase was $241,326.76, or 34% of the current rent of $711,513.24. That current rent does not equate to the agreed figure of $75,000.00 per month (plus GST), but nothing seems to turn on this. Subsequent events 1. On 6 May 2014, Mr Zhou sent a "rental history chart" to Messrs Temelkov and Tom Panayi. It was apparently intended to explain the rent increases in some way. On 5 June 2014, when Mr Temelkov sent an email to Mr Zhou asking him "please work out the proposed increases", Mr Zhou appears to have replied the same day, attaching another copy of that chart. No significance appears to attach to these exchanges of emails, except to note that there is no documentary evidence of any questioning of the proposed increases prior to 1 July 2014. Specifically, Mr Tom Panayi's emails of 5 and 25 June 2014 and 1 July 2014 made no reference to the topic. 2. On 1 July 2014, Ms Lam of Bettervale sent out invoices to the defendants for rent at the new rates. There was no reaction until 8 July 2014, when Mr Tom Panayi sent Mr Toohey the email, introducing himself and referring to rent increases etc, set out at [136] above. 3. The principal reaction from the defendants appears to have been to ignore the increases (including by not paying rent at the increased rates) and, instead, to request the "new leases". However, after some reminders about the outstanding invoices, Mr Zhou sent an email to Ms Lam and Mr Toohey on 15 July 2014. That email referred to a payment recently made on account of overdue rent and said: We are still waiting for the new leases to be received We also request a round table meeting to discuss the increase in rent for W2 1. Mr Toohey's response, the next day, was to send an email pointing out that (in his view) the rent for Warehouse 2 "is now market" and that the previous "discount" had been reversed. He said "[i]t is non-negotiable". He referred to the increase in rent on the ground lease. He also referred to "notice": Warehouse 2 is now market. It was discounted under agreement that new lease period it went back to market. It is non negotiable. We had a 63% increase in our ground lease and have not passed that on but if you want to give notice please advise as we have to plan also. 1. On 18 August 2014, Ms Lam reported to Mr Toohey, in effect, that Bettervale could not pay rent to the head lessor until it received payments from WSI and WSII. Mr Toohey passed that advice onto Mr Tom Panayi: 1. Ms Lam's email: Hi Brian Please be advised that we still not yet pay the Aug14 lease to NSW Port. It will be paid upon received payment from WSI and WSII. … 1. Mr Toohey's email: Tom, we have need for help here. we are in jeopardy of forfeiting lease with big increases we got. That puts us all in the shit! please pay us substantial amount.. please Brian 1. Mr Toohey was also experiencing difficulties with other creditors. He forwarded a chain of emails to Mr Temelkov on 20 August 2014. Mr Toohey's email to Mr Temelkov said: Tom, if you don't accept increase we will have to file to let you go, also with large increase we got, we only brought you back to market in W2 warehouse, which was heavily discounted previously. If we can't get increase we will possibly have to release the lease back to NSW ports [sic], who won't be so forgiving. We are finding it really hard to break-even and cash flow is imperative. Hope you understand this increase is non negotiable. Regards Brian 1. In the result, Mr Toohey appears to have advanced money to Bettervale, which used it to pay outstanding debts. Mr Toohey then asked Mr Temelkov to advance an equivalent pro-rata amount (that is, pro-rata according to their shareholdings). It does not appear that Mr Temelkov saw fit to do this. Instead, he requested a meeting. Mr Toohey's evidence 1. Mr Toohey was cross-examined closely about his emails of 5 May 2014. His evidence in cross-examination was less than impressive. It was in the course of cross-examination on this topic that he gave the evidence referred to at [51] above, which in my view was dishonest. 2. Mr Toohey agreed that the words "as per lease arrangements" in his email referred to the head lease and the subleases. He sought to suggest that the email "was… entirely unprompted by anything at all from either of the defendants" (T55.43-.45). He was then asked whether he "did a market rent adjustment". Characteristically, his evidence on this was dissembling, because in my view he perceived that to acknowledge that this was what he had done (as, plainly, the email suggested) would be disadvantageous to Bettervale's case. He gave the following evidence (T56.1-.50): Q. You did a market rent adjustment, correct? A. I adjusted their rent, yes. Q. You did a market rent adjustment, didn't you? A. I brought it up to market, yes. Q. Is there a problem in your saying you did a market rent adjustment? A. Looking back on this when - in 2013, everything was New South Wales Ports adjusting Bettervale's market rent. So what I was doing, was I was adjusting the rents to market. Now, I mean, the term market rent is something that is constantly in my mind because of Sydney Ports anyway, but I mean, I was adjusting the rents to market. So is there in problem in saying market rent; no, it's market rent. Q. Sir, this is not - doesn't say, "The market rent will be", what you have said in this email is "The market rent adjustment rent is", that's what you've said, isn't it? A. Yes. Q. And you knew full well that on an exercise of an option there would be market rent adjustment, correct? A. No, there was other scenarios. Q. You knew full well in 2014 that upon an option being exercised, there would be a market rent adjustment, didn't you? A. Yes, that's one of the things that I understood. Q. And that's what you were referring to in this email, that is the market rent adjustment consequent upon an option having been exercised? A. No, that's not what I was referring to, and probably poorly worded this, and I haven't probably put in the right preparation to this email, but that's not what it - Q. You [now] regard in your attempt to avoid there being a binding lease between the parties, you now regard these words as inappropriate, don't you? A. Yes, I do. Q. You now wished you'd used different or better words to suit your current case, correct? A. Yes. Q. The reality is, sir, I put it to you; you knew full well in May 2014 that the market rent adjustment to which you were referring in this email was a market rent adjustment consequent upon an option having been exercised? A. Absolutely not, that's not true. Q. Sir, I put it to you, you're saying that now because you do not want the Court to find there's a binding lease in respect of these premises to the subtenants? A. That's not true. 1. He was then asked to explain in his own words why he wrote the "unprompted" emails (T57.12-.23): Q. Sir, just to give you a chance in your own words; why do you say you wrote unprompted this email, or these emails in these terms? A. That's quite complicated, but I had problems with these tenants. I had problems with the people that controlled these tenancies, the Panayi's, in getting paid. I wanted to put them on notice that their rents were going to increase, and that was pretty much the motivation behind it. Q. Sir, in answer to my question in your own words as to why you drafted an email in these terms is problems with these tenants; is that the nut of what you just said? A. I wanted to put them on notice that there was going to be rental increases coming up, yes. 1. Those aspects of Mr Toohey's evidence are in my view entirely unacceptable. It was plain, during this passage of cross-examination (and indeed, many others) that Mr Toohey was struggling to find an answer to questions that would not be damaging to his case, in circumstances where, in my view, he understood that a truthful answer would be damaging. 2. Another puzzling aspect of Mr Toohey's evidence is, why did he send the emails on 5 May 2014 when, on his evidence: 1. he did not want to mention the options, for fear of provoking a valid exercise; and 2. he thought that the option exercise window was, for each sublease, the period of three months leading up to the date of its expiry by effluxion of time? 1. It is well-nigh impossible to reconcile this clear conflict in Mr Toohey's evidence. That is so even though his pretended understanding as to the duration of the option exercise windows was, in my view, false. I think that the web of lies has by now become so tangled that it cannot be unravelled. Submissions 1. The central question however, in relation to the emails of 5 May 2014, is: why did Mr Toohey send them? To put it in Mr Pritchard's language, what was the genesis of those emails? 2. Mr Pritchard submitted that the emails were sent because: 1. each defendant had given notice (on his view of the facts, repeated oral notice) of its intention to exercise its option for renewal; 2. Mr Toohey knew that, upon exercise of an option for renewal, the commencement date of the new subleases would provide a market rent review occasion; and 3. accordingly, Mr Toohey sought to avail himself of that opportunity by giving the market assessment figures that the emails contained. 1. In those circumstances, Mr Pritchard submitted, the emails of 5 May 2014 should be taken as powerfully corroborative of his client's evidence as to oral notice of exercise of the options. 2. Mr Lawrance submitted that: 1. there had been no oral notices of intention to exercise the options (it being common ground that there were no written notices); 2. accordingly, Mr Toohey could not have understood that he had a market rent review opportunity under any of the subleases; 3. the substance (if not the precise wording) of the emails was equally consistent with Bettervale's exercise of its right to specify an increased rent to be payable during any holding-over; and 4. Mr Toohey's explanation, which was in substance that he knew he could raise the rent but was not paying particular attention to the mechanism, should be accepted. 1. For those reasons, Mr Lawrance submitted, the emails, properly understood, provided no support for this aspect of the defendants' cases. Findings as to the emails 1. To my mind, the emails, read in context, do not provide any corroboration for the defendants' evidence of oral notices of exercise of the options. I have no doubt that Mr Toohey understood, and for some time had understood, that the defendants were interested in taking up their options for renewal. I have no doubt that, as at 5 May 2014, he understood that, if the options were exercised (as was still open for Warehouse 2) there would be an opportunity under the subleases to increase the rentals to market rates. Equally, I am satisfied that Mr Toohey understood that if there had been no effective exercise of the options, any future subleases would be at terms and on conditions to be agreed. 2. In those circumstances, in my view, Mr Toohey sought to do two things by his emails: 1. to inform WSI and WSII, in respect of Warehouses 1 and 3, that if they wished to take a new subleases of those warehouses then it would be at the rents specified in the email; and 2. to inform WSII that, if it wished to exercise its option to renew the sublease for Warehouse 2, the rental stated was what Bettervale would seek to impose. 1. Further, in my view, that is precisely how the emails should be understood, in the context of what had happened up to 5 May 2014. There had been expressions of interest in renewing the subleases. There had been no express notice of exercise, written or oral. Thus, as to Warehouses 1 and 3, the windows having closed on 31 March 2014, there could be no exercise. Although the possibility of exercise remained for Warehouse 2, the question of rental remained to be decided. 2. Both before and after 5 May 2014, all parties were in my view keenly aware that if the options for renewal were exercised, then the rental payable could be increased to whatever the market rate might be. WSI and WSII were interested in renewing their subleases, but were concerned at the rental to be paid. In my view, neither company was prepared to commit itself to exercising the options for renewal without an understanding of what the rental on renewal would be. 3. In effect, both before and after 5 May 2014, there was an extended period of negotiation. When one views the emails of 5 May 2014 in the full context of relevant events before and after, they are quite clearly, a step in those negotiations. They are statements of the principal matter of concern: namely, the rents to be charged from 1 July 2014. 4. That the emails were but a step in those negotiations is confirmed, in my view, by what happened thereafter, as recounted at [153] to [159] above. 5. It may be – to jump ahead for a moment – that the emails of 5 May 2014 could be taken as offers of new subleases at the rentals set out in the attached spreadsheets and (perhaps) by implication, on the terms of the existing subleases as though the options had been exercised. But even if this were the correct characterisation of those emails, the simple fact is that no such offer was accepted. True, neither WSI nor WSII in terms disputed the suggested rent, or proposed what it thought the correct rent might be. Each sought to discuss the rent. More importantly, however, neither WSI nor WSII paid the increased rents. In the case of the former, that failure has persisted to the present day. In the case of the latter, it persisted until February 2015, when (as I have said), it began to pay off the arrears, and commenced to pay monthly rental at the increased rate. 6. Accordingly, in my view, the emails of 5 May 2014, considered correctly and in context, provide no corroboration of the defendants' assertion of prior oral exercises of their options for renewal. Oral notices of exercise of options after 5 May 2014 1. As to Warehouses 1 and 3, this "central dispute of fact" can be relevant only if Bettervale agreed to waive not only the requirement for written exercise of option, but also the requirement for timeous exercise. Thus, as to those warehouses, a resolution of this dispute has significance only if the defendants' estoppel cases succeed, or if in some way there can be spelled out of what happened an oral contract either sufficiently evidenced in writing on the part of Bettervale or enforceable through acts of part performance on the part of the defendants. 2. Mr Temelkov gave evidence of speaking to Mr Toohey after he received and read the email of 5 May 2014. According to Mr Temelkov, those conversations were to the following effect (affidavit [92] – [94]): 92. After the above conversation, during May 2014, I had a couple of short conversations with Brian, each of which was to the following effect: Me: Brian, can we get together to talk about the rent for W2? Brian: There's no point, Tom. The rent is not negotiable. 93. I thought it was strange that that Brian would not negotiate the amount of market rent on the renewed lease. I thought I should say something to him to confirm my belief that we would be a long-term tenant and had exercised our option under the leases. Either in the conversation referred to above or sometime shortly thereafter, Brian and I had the following conversation: Me: Brian we have an option here. We are putting you on notice that we are exercising that option. Brian: Tom, you can have your option so long as you pay the increased rental. 94. On another occasion, in or around June 2014, I had the following conversation with Brian: Me: Look, we are still not too happy about the increased rental for W2. I would like to talk to you about that, but as you know my whole life's work is invested here and we intend on staying here. We will pay the new rental to get new leases, but I would still like to talk about the amount of rental. Brian: There is no point talking about the rent. The new rental is non-negotiable. You can have your option, but the rent is not negotiable. Me: OK, well send the new leases through. 1. The first point to note is that even if those conversations took place, the only one in which there was a purported (oral) exercise of option was that recounted in [93]. The precise date of that conversation is not given. 2. Even if [91] of Mr Temelkov's affidavit should be read as saying that the conversation there set out occurred "on or about 5 May 2014", there is no basis on which the conversations set out at [92] and [93] can be dated to any particular time in that month. Thus, even if Mr Temelkov did use the words that he attributed to himself at [93], there is no basis for concluding that this conversation occurred on or before 14 May 2014, which is when the option window for Warehouse 2 closed. (Of course, the option window for Warehouse 3 had closed after 31 March 2014.) 3. Mr Toohey denied that these conversations occurred. Whilst I would not accept his uncorroborated denial unless it were consistent with the probabilities, objectively viewed, that is not relevant. The question is, rather, whether I accept Mr Temelkov's uncorroborated evidence that they did occur. 4. Mr Temelkov did not confirm any of the May conversations in an email or otherwise. So far as the documents in the case reveal, the only action that Mr Temelkov undertook after 5 May 2014 was to commission an analysis of the rent history from Mr Zhou. This Mr Zhou provided on 6 May 2014 (and again on 5 June 2014): see at [153] above. 5. To my mind, Mr Temelkov's attitude, in commissioning that analysis of the rent increases, is consistent with my view of his position overall, as I have set it out at [122] above. Mr Temelkov did not want to commit WSII to exercising its option of renewal for Warehouse 2 (as at May 2014, the only extant option) until he could be satisfied as to the rent that would be payable and until he had weighed up the alternative of moving to other premises. 6. Further, in my view, it is not credible that Mr Temelkov could have thought, after 5 May 2014, that an oral exercise of the option for renewal would be sufficient. That is because he and Mr Tom Panayi had reviewed the subleases after they received and considered those emails. (On my findings – see at [147(3)] above – this was the second occasion when they had done so.) 7. Mr Tom Panayi said that he and Mr Temelkov had reviewed the subleases after May 2014 (T228.46-229.1), although he denied that there had been any prior review (T229.3-.8). He said that they looked at all three subleases (T229.14-.18). He then gave the following evidence, by reference to the Warehouse 1 sublease (which commenced at page 140 of the Court Book, exhibit PX1) (T229.40-230.16): Q. If you go to page 145 please you and Mr Temelkov looked at clause 6? A. Correct. Q. You saw clause 7? A. Well we looked at the leases because of the rent review, so we definitely looked at number 6 because that's what we were concerned about. Q. You looked at number 7 as well didn't you? A. I may have looked at it but the whole purpose was to look at the rent review. Q. You know you looked at clause 7 don't you? A. No, I don't know that I looked at it. Q. You looked at clause 7 and you realised that there were references to six months and three months, must refer to the option window didn't you? A. That wasn't a concern. Q. But that's what you realised isn't it? A. No, it's not; the concern was a rent review. Q. But you looked at clause 7 A. No, I didn't. Q. You've got an actual recollection now that you didn't look at clause 7? A. I may have looked at the leases but I didn't go to the leases specifically for that, it wasn't a concern. 1. In my view, Mr Tom Panayi was not telling the truth when he said that he did not specifically look at cl 7. I think Mr Tom Panayi was acutely aware that if he admitted to having done so, it would be detrimental to WSI's case (and also to the case of WSII). Accordingly, in my view, he dissembled, so as to avoid conceding that he had indeed looked at the very next clause after the rent review clause (cl 6) that, he said, was of vital importance. 2. As I have said, Mr Temelkov could not have understood, after 5 May 2014, that the subleases for Warehouses 2 and 3 permitted oral exercise of the options for renewal, or that any such oral exercise would give rise to a binding sublease for a term of 5 years. 3. Accordingly, in my view, if Mr Temelkov wished to exercise the option for Warehouse 2, he would have done so in writing. There was no point in his giving purported oral notice of exercise. He must have known that. The probabilities, regarded objectively, tell strongly against acceptance of his assertion that he did so. 4. I do not find that Mr Temelkov gave what purported to be oral notice of exercise of option for either Warehouse 2 or Warehouse 3 either prior to 14 May 2014 or at all in that month. 5. That leaves the evidence of Mr Peter Panayi. He said that he had a conversation with Mr Toohey on about 5 May 2014, after reading and receiving Mr Toohey's email of the same date. According to Mr Peter Panayi, the conversation was to the following effect (affidavit, [51]): Me: I have your email Brian, what is going on with the rent? You agreed at our meeting in Melbourne not to increase it, if we took up the option on the warehouse. We are waiting on the new leases that we agreed to in Melbourne, please send them through because we intend on staying here and want the agreed leases issued. Brian: We have to increase the rent, things change. I'll send them through. 1. After that conversation, Mr Peter Panayi said, he asked his son to "follow up the new leases that had been agreed on" with Mr Toohey. Mr Tom Panayi did not do so, at least in writing, until he sent his email of 5 June 2014 to Mr Toohey (see at [139]) above. Thereafter, Mr Peter Panayi said, "around June 2014", he had a conversation with Mr Toohey to the following effect (affidavit, [53]): Brian: What are we doing about these leases? Me: Brian, both companies are staying. We want our renewed leases. I will get Tom to confirm that we want them. He has been ringing you to chase them up. Brian: Ok. 1. In relation to both the alleged instruction to Mr Tom Panayi and the alleged "June 2014" conversation with Mr Toohey, Mr Peter Panayi (if, contrary to my view, one were to accept his evidence) was doing no more than following up what he claims to have been agreed at the tennis club meeting. There is no suggestion, in his evidence on those topics, that Mr Peter Panayi was giving notice of exercise of the options. 2. Acceptance of Mr Peter Panayi's evidence of the conversations would necessarily involve acceptance of the proposition that there was some agreement reached at the tennis club meeting over and above what was set out in Mr Toohey's email sent on the same day as that meeting. For the reasons I have given, the email is an accurate record, or summary, of what was agreed. I find that there was no agreement to "new leases" in the tennis club meeting. I have said already that I regard Mr Peter Panayi's evidence to the contrary as dishonest. 3. Mr Toohey denied the conversations in question. In my view, notwithstanding my view as to his lack of credibility, the surrounding circumstances and probabilities, viewed objectively, facilitate acceptance of his denial. It is simply not believable that Mr Toohey would have acceded to the proposition that "new leases" had been agreed during the tennis club meeting, bearing in mind the email he sent shortly after that meeting concluded. 4. I do however accept that Mr Peter Panayi gave instructions to his son to seek new leases from Bettervale, as though there had been some agreement. In my view, that was part of a plan that the defendants then concocted to put together a string of actions and emails intended to suggest that there had been some prior agreement. In my view, the defendants did this because they well knew that, by June 2014, the option windows had closed for each of the subleases, and the options had not been exercised. Oral requests for new subleases 1. Mr Temelkov said (affidavit, [97]) that "on a couple of occasions during June and July", he asked Mr Toohey "where are the new leases?" and that Mr Toohey replied "its fine, Tom. They are with the lawyers. We will have them to you shortly for signing." 2. Mr Toohey did not deny this evidence in his affidavit. He sought to do so in the course of cross-examination. In my view, his denial in cross-examination should not be accepted, particularly bearing in mind what I have said at [55] above. 3. On this matter, I accept Mr Temelkov's evidence. It seems to me to be consistent with the probabilities, objectively regarded. The conversations of which Mr Temelkov gave evidence occurred at the very time that Mr Toohey was fobbing off Mr Tom Panayi, in relation to requests for new leases, making the three dishonest statements set out at [51] above. 4. Equally, in my view, Mr Temelkov's inquiries were undertaken as part of the execution of the plan to which I have referred at [197] above. Mr Temelkov was seeking to create the impression that there had been prior dealings which, one way or another, entitled his company to new subleases for Warehouses 2 and 3. Thus, although I have found that the conversations are likely to have occurred, I do not find that in fact there had been any prior dealings giving rise, one way or another, to an obligation on the part of Bettervale to grant new subleases to WSII. 5. In this context, I refer to an email exchange between Mr Crombie and Mr Temelkov on 14 July 2014. It is clear that, at that time and for some time previously, Mr Crombie had been looking for premises into which WSII could relocate its business. Mr Crombie wrote, in relation to a "new site": Hi Tom – we trust all is well. Just checking in to see if we can assist you in any way 1. Mr Temelkov replied: Hi Michael, Welcome back It's still up in the air Can you send me the rates again please? 1. The reference to "the rates" relates to a property that Mr Crombie had suggested as suitable. 2. The significance of this exchange is clear. It is obvious that when Mr Temelkov said "it's up in the air", he was referring to the state of the negotiations between himself and Mr Toohey. 3. Mr Temelkov was cross-examined on that email exchange. He gave the following evidence (T157.1-.50): Q. Could you go please to tab 14, and could you go to a second page please, and you will see an email half way down the page from Mr Crombie to yourself, do you see that at about 9 o'clock on 14 July? A. Yes. Q. You see the subject heading, "New site"? A. Yes. Q. That is because you had told Mr Crombie that you were looking for a new site for WSI International, correct? A. That was replying to his email, he had it down as the new site, I didn't title the email as "New site", but ‑ Q. You had told Mr Crombie that you were looking for a new site for WSI International, hadn't you? A. No. Q. When you got that email and saw the subject heading, "New site", you thought to yourself, here goes Mr Crombie again labouring under another misapprehension, is that right? A. That is correct. Q. That is what you thought? A. I thought, here is another sale. Q. You see that what Mr Crombie says to you is, "Hi Tom, we trust all is well. Just checking in to see if we can assist you in any way", do you have that? A. Yes, I guess so. Q. Go up to the top of the page and you say back to him, "Hi Michael, welcome back", and then you say, "It is still up in the air", do you see that? A. Yes. Q. You said that because as at 14 July 2014, in your mind whether or not WSI International stayed at its existing premises at Bumborah Point Road was still up in the air, didn't you? A. No, sir, that is not right. Q. You knew that you had not exercised any of your options, didn't you? A. No, sir. Q. You knew that the leases had expired on 30 June 2014? A. No, sir. Q. You knew, as at 14 July 2014, that you didn't have a long term lease of premises at Bumborah Point Road, correct? A. No. Q. That is why you said to Mr Crombie, "It is still up in the air", correct? A. No. 1. In my view, Mr Temelkov's evidence as to what he thought Mr Crombie was doing was false. Equally, in my view, Mr Temelkov's attempt to explain away the words "it's still up in the air" was false. In my view, by the time this email exchanged happened, Mr Temelkov understood that the options for renewal in respect of Warehouses 2 and 3 had not been exercised, and understood that WSII did not have the benefit of secure tenure for five years. 2. Although, strictly speaking, it does not fall under this heading, I should refer back to the email that Mr Zhou sent to Ms Lam and Mr Toohey on 15 July 2014. I have set out the terms of that email at [155] above. That email was sent on Mr Temelkov's instruction. It was common ground that Mr Temelkov had prepared a draft of the precise words to be used, and had given that to Mr Zhou. The email was sent the day after Mr Temelkov had indicated to Mr Crombie that "it's still up in the air". 3. In my view, Mr Temelkov's act in drafting that email and instructing Mr Zhou to send it was another step in the execution of the plan to which I have referred at [197] above. Mr Temelkov could not have believed honestly and on reasonable grounds both that (as he told Mr Crombie) the future of the subleases was "up in the air", and (as asserted in the email he drafted for Mr Zhou) that there was any agreement for "the new leases". 4. Although Mr Temelkov claimed that, in June 2014, he told Mr Toohey that WSII would accept the new rent if it had no alternative (see [94] of his affidavit, set out at [180] above, I do not accept that this was his, or WSII's, position. Mr Temelkov continued to attempt to renegotiate the rent. This is made clear, apart from anything else, by his affidavit at [104], [105]: 104. I was not happy with the proposed increased rent for W2 and had sought a meeting with Brian to discuss the proposed increased rent. Because WSI was still seeking to negotiate the proposed new rent, WSI continued to pay the same amount that it had been paying up to 1 July 2014 ($70,632.81) each month after that date up until February 2015 (see below). This occurred because Peter Panayi (one of the other shareholders in WSI) instructed Joe Zhou in about early July 2014, in the course of a conversation for which I was present, as follows: Peter: Joe, just keep paying the same amount for warehouse 2 while we try and negotiate with Brian about the rent for the new lease. 105. In the months following July 2014, I had a couple of further short exchanges with Brian each of which was to the following effect: Me: Brian, can we still down and talk about the new rent for warehouse 2? Brian: There's no point Tom, the new rent is not negotiable. You've got your new lease, but you need to pay market rent. 1. It is also made clear by other material. There is no need to expand these already over-long reasons by further references or quotations. The preparation of and failure to issue new subleases 1. It is convenient to deal with these matters together. 2. As I have noted, Mr Tom Panayi sent an email to Ms Lam and Mr Toohey on 5 June 2014 asking for "the new lease agreement for W1". 3. The next day, Ms Lam sent an email to Mr Joshua Pederick of Norris Coates, instructing him to prepare "renew lease agreement on our behalf and forward to us upon completed [sic]". Norris Coates was the firm of solicitors then acting for Bettervale. Mr Pederick was the partner in that firm apparently responsible for performing Bettervale's legal work. 4. That email was copied to Mr Toohey. I have no doubt that it was sent on his instructions. 5. Significantly, Ms Lam's email to Mr Pederick forwarded Mr Tom Panayi's email of the day before. It is obvious that Mr Panayi's request and Ms Lam's instruction (on behalf of Mr Toohey) were related. 6. There seems to have been some urgency. On 18 June 2014, Ms Lam wrote to Mr Pederick asking if Bettervale could receive the new lease agreement "by Friday". Mr Pederick replied "I expect so". 7. The next day, on 19 June 2014, Mr Pederick sent to Mr Toohey draft subleases for each of the warehouses "for your review". He sought instructions as to certain matters. Mr Pederick had also prepared, and forwarded to Mr Toohey, forms of guarantee and indemnity in respect of each sublease. 8. I have noted already that on 25 June 2014, Mr Tom Panayi followed up his request for "lease agreement as per below email" and that on 1 July 2014 he followed up this request once more. It was in response to the email of 1 July 2014 that Mr Toohey sent the dishonest response to which I have referred at [51] above. 9. Mr Pritchard relied on the events relating to the preparation of the draft subleases as corroborating his clients' case that, one way or another, there was an enforceable agreement for renewal of the subleases. 10. Mr Toohey sought to explain the preparation of the draft subleases by saying that he wanted to be ready straight away if the options for renewal were exercised. Acceptance of that proposition would involve: 1. overlooking my general views on Mr Toohey's lack of credibility; and 2. overlooking, in particular, my conclusion that, well before the instructions were given to Mr Pederick, Mr Toohey was in fact familiar with and understood the renewal provisions of the subleases. 1. There is no reason to overlook those points. It follows that I do not accept his explanation. Thus, again, there is the problem of attempting to extract the truth from the tangled web of lies woven by Mr Toohey. 2. Mr Toohey's cross-examination on the preparation of the draft subleases is even more convoluted than most other aspects of his oral evidence. He repeated (T68.30-.31) that the exercise was simply to have "drafts in preparation if they did – if they did exercise their option". He estimated the cost at about $500.00 (T68.33-.37), and said that he was prepared to incur that cost against the possibility of exercise (T68.39-.41). 3. Mr Toohey appeared to suggest that it was no more than a coincidence that the rents stated in the emails of 5 May 2014 corresponded exactly with the rents stated in the draft subleases. He said at first that he had not made sure that the rents would correspond, and did not think that anyone else must have done so (T68.43-69.1). He then appeared, although only with some reluctance, to retreat from that proposition (T69.3-.20). 4. Nonetheless, Mr Toohey stood by his denial that he had instructed preparation of the subleases because he believed that the defendants had exercised their options (T69.34-.37). He then gave the following evidence (T69.39-70.20): Q. And it is only now, that is for the purpose of this case, you have come to be aware that in relation to the timing of the option period, the document, 5 June 2014, was outside the option exercise period? A. No, I understood that Panayis' email suggesting there was arrangements, I understood and I was scared that they were going to exercise an option. It had nothing to do with Temelkov because the Panayis controlled the whole of the organisations. So if Panayi got it, right, they were going to exercise all of their options, so in preparation, I gave instructions to Pederick and Joyce to draft copies. Q. It was a significant step to get these solicitors to do this, wasn't it? A. No. Q. Was there any urgency about what they were doing? A. Yes. Q. Was there? A. Yep. Q. What was the urgency? A. Because I thought that the leases were about due. Q. Because HIS HONOUR Q. What do you mean you thought the leases were about due? A. Well, I gave Joyce and the solicitor instructions early June, and I knew that the leases were up on 30 June, all right, and 14 August, so I certainly wanted to be prepared in case they actually performed their options and performed them correctly and gave them to me in writing. I wasn't quite sure whether they totally understood, right, but that wasn't up to me anyway. I was just being prepared. 1. In my view, the explanation for preparation of the draft subleases is that Mr Toohey was prepared, at that time, to renew them (or to grant new subleases as though there had been renewals), but only if he could get the rents that he had notified in his emails of 5 May 2014. The material to which I have referred at [157] to [159] above makes it clear, objectively, that Bettervale was having trouble meeting its financial obligations. It makes it clear, also, that those troubles arose from the defendants' tardy payments of rent, and from their refusals to pay the increased rents demanded. I do not think that, as at June/July 2014, Mr Toohey had fixed on sale of the head lease as the way for Bettervale to escape its financial predicament. I do however think that, this being one of the alternatives available to Bettervale, Mr Toohey was considering it at this time. 2. In my view, if the defendants had accepted the terms of the draft subleases (including, critically – particularly in the case of WSI – the requirement for directors' guarantees), it is likely that Mr Toohey would have caused Bettervale to grant them. Bettervale would then have been assured of what were effectively market levels of income (overall, very substantially more than was being paid). It would have had the benefit of directors' guarantees as "security" for non-payment or tardy payment of rent. Had new subleases been granted on those terms, the position, from Bettervale's perspective, would have been substantially better than had existed up until 1 July 2014. 3. Mr Pritchard submitted that Mr Toohey through Ms Lam instructed the draft subleases to be prepared because he knew that the options for renewal had been exercised. If that were the case, one would expect the terms of the drafts to follow those of the existing subleases, save for one of the two options of renewal. Counsel's submissions did not address the extent to which the terms of the drafts coincided with the terms of the existing subleases. However, on a quick comparison, it would appear that for one of the draft subleases, the provisions of cl 9 (which deal with Bank Guarantee / Security Deposit) were substantially different. In addition, as I have said, the draft subleases required the directors and the shareholders of each sublessee to give guarantees of the obligations of that sublessee. 4. In those circumstances, there is at least some reason for thinking that the draft subleases prepared by Mr Pederick went beyond what should have been prepared had the instruction to prepare them been given in response to exercise of the options in the subleases. However, since this point was not addressed, and bearing in mind cl 2.2(iii) of the head lease as imported into the subleases, I place no weight on it. 5. Mr Toohey received the draft subleases on 19 June 2014. He did not reply to the defendants' requests for new subleases until 16 July 2014. On that day, he replied to Mr Zhou's email referred to at [155]. Mr Toohey said: Warehouse 2 is now market. It was discounted under agreement that new lease period it went back to market. It is non negotiable. We had a 63% increase in our ground lease and have not passed that on but if you want to give notice please advise as we have to plan also. 1. Thereafter, Mr Toohey retained possession of the draft subleases. There were continuing exchanges between Bettervale and the defendants. On 20 October 2014, in response to an email from Mr Tom Panayi asking for rent to be invoiced at the pre-July rate of $75,000.00 plus GST per month "as per existing agreement until we sit down and discuss", Mr Toohey replied: Tom, sorry, cant [sic] do. the rent has been reviewed and stands as I notified WSI months ago. If you have an alternative offer, please give me your best shot first up and I can let you know if its workable. WSI are actually in breach of our agreement by not keeping up with your new rent as you were notified in writing with plenty of notice and a new lease wont be issued until you get up to date with rent and can provide a security fee which is agreeable to me to cover rents shortfalls etc. 1. To my mind, that email exchange makes it plain that, as between WSI and Bettervale, WSI was still seeking to negotiate the rent that might be payable for its continued occupation of the premises, and Bettervale was continuing to insist that the rent be agreed before any new sublease would be granted. 2. Mr Pritchard directed attention to the words "a new lease won't be issued" in Mr Toohey's email. He submitted that those words drew attention to an existing agreement (whether or not legally enforceable) for a new sublease. I do not agree. In my view, those words simply indicate that Bettervale does not intend to enter into a new sublease with WSI until the question of rent has been resolved. Further, in my view, this email is, if anything, consistent with Bettervale's case that no binding agreements for sublease then existed. It and the email to which it responded suggest very strongly that Bettervale and WSI at least were still in negotiation. 3. To my mind, nothing in the circumstances relating to the non-issue of new subleases lends any corroboration to the evidence of the defendants' witnesses, or any support for their case, however put. The November 2014 conversation 1. There is no doubt that Messrs Toohey and Temelkov had a meeting on site (at 11 BP Road) in November 2014. There is no doubt that Mr Toohey told Mr Temelkov that Bettervale had decided to sell the head lease. According to Mr Temelkov, the conversation was to the following effect (affidavit, [114]): 114. In early November 2014, a meeting was arranged and I had a discussion with Brian at the front offices of WSI to the following effect: Brian: I have had enough. I am going to sell the whole site. I have had a new 10 plus 10 lease approved by NSW ports that will add value. Michael Crombie is on the job, and we have already got someone interested. Me: Brian, how come you have not told me you are selling the site because I am a shareholder and major tenant. Why have you not given me the opportunity to buy your shareholding out? Brian: Oh, I don't think you could afford it or that you were interested. Me: Why would you think I wasn't interested? I have been here with you since 2004. I saw the first slab of concrete laid. I am very interested in the purchase of the site or your shareholding. Can you send me some information? I wold also like to know why I have never been given any financial records for Bettervale because I have done a rough calculation and I am under the belief that Bettervale has made a substantial profit and I have never received any return on my investment. Brian: Are you calling me thief? Me: No. You are just deflecting my question. I am entitled to some return but you have never provided me with any actual financials or any tax returns. Brian: Don't you trust me? I am very offended you have called me a thief. If you want money go and see the Panayi's they owe us $600,000 in back rent and if you get money that can be your shareholding. 1. Mr Toohey referred to this in his affidavit in reply. He did not there dispute that there had been a conversation including words to the effect of those set out by Mr Temelkov. However, Mr Toohey said, in the course of that meeting he said that: Bettervale could sell the site because no one had exercised their options; there were no long-term leases; and that he had engaged Mr Crombie as the selling agent. 2. Mr Toohey said, in addition, that in the course of the conversation he denied what Mr Temelkov had said about his taking money out of the business, and that there was the following further discussion (affidavit in reply, [38]): 38. During the meeting, we had a discussion about what Mr Temelkov would receive from the sale. There was an exchange to the following effect: Me: You will get 7% of what's left over after we've paid off the debts. I've done some calculations and it should be about $400,000. TT: That's not much return on investment after 10 years. Where have all the profits gone? Me: The Panayis owe us over $700,000. That's where the profits have gone. Plus we've paid off loans on the way. TT: You've taken money out somewhere. 1. The principal dispute is whether Mr Toohey said words to the effect that Bettervale could sell the site because no-one had exercised their options. 2. Mr Toohey said in cross-examination that he had made the decision to sell about 13 months earlier, when he got the notice of increase from NSW Ports. He said that "I realised that I had bad tenants and that I was going to be struggling to get my make good, and I realised that they were behind in their rent, and I realised there was a fairly hopeless situation" (T95.18-.24). 3. If this evidence were to be accepted, it would be very hard to understand why Mr Toohey was acting as he did, in relation to rent increases and preparation of new subleases, in May and June 2014. I think that this aspect of Mr Toohey's evidence (that is to say, the passage that I have just quoted) was, like so much else, false. After all, there had been a close relationship between Messrs Toohey and Temelkov for many years. They were effectively joint venturers in the development and exploitation of 11 BP Road, although Mr Temelkov's interest in the joint venture was small (7%). 4. To my mind, it is inconceivable that even someone of Mr Toohey's apparently relaxed standards of commercial morality, having made a decision to sell, would have sat on it for some 13 months without informing his joint venture partner. That is reinforced by the hitherto close working relationship that had subsisted between Messrs Toohey and Temelkov for many years. The reality, I think, is that Mr Toohey had reached a provisional decision: that Bettervale would sell the property unless it could secure renewals of the leases at rates that would cover its "make good" and return a reasonable profit on the capital outlaid. But that is by the by for present purposes. 5. In the course of cross-examination, Mr Toohey denied some of the words that Mr Temelkov had attributed to himself, when recounting this conversation in his affidavit. Further, Mr Toohey denied that he had said some of the words that Mr Temelkov attributed to him. None of those disputes, as to the content of the conversation, had been raised in Mr Toohey's affidavit in reply. 6. The cross-examination took Mr Toohey through Mr Temelkov's account of the conversation, point by point, and elicited his response as to whether particular things had or had not been said. It then continued (T97.47-98.11): Q. Anything else said that you can recall? A. No, we dealt with the fact that he expressed that he wanted - why I didn't offer it to him. No, that was pretty much - pretty much the scenario of the conversation. Q. You certainly didn't say, "Bettervale can sell the site, because no one has exercised their options, there is no long term leases", you certainly didn't say that, did you? A. I think I may have said that, yeah. Q. I asked you, in an open ended way, to recall what else you could remember at this meeting, didn't I? A. Mm hmm. Q. You didn't remember those words, did you? A. No. 1. Mr Toohey was then shown the relevant paragraph of his affidavit and then, after some further questions, he gave the following evidence (T99.3-.25): Q. Do you agree I gave you an open ended opportunity to remember everything else about this meeting? A. You did. Q. Then you didn't remember anything about this issue about no one has exercised their options, no long term leases? A. Not when you asked the question, no. Q. Those words were never said at the meeting in November 2014? A. Yes they were. Q. I am putting to you, sir, this is an example of you being prepared to lie to advance your client's, Bettervale's, interest in this case, do you agree with that? A. Absolutely not. Q. You were prepared to swear something five days ago that you didn't recall, correct? A. Correct. Q. You put it in paragraph 36 of your affidavit because you wished you had said something like that, correct? A. No, that is not true, it was said. 1. None of that does Mr Toohey any credit: in particular, his concession that he was prepared to swear to the truth of something that he did not recall. To my mind, it deprives his affidavit evidence as to the conversation of any credibility whatsoever. 2. I do not find that Mr Toohey said to Mr Temelkov, in the course of the November 2014 meeting, words to the effect that no one had exercised their options and there were no long term leases. A related question of fact 1. Although that is the end of this particular factual dispute, in the terms posed by Mr Pritchard, there is another relevant aspect of the evidence to which Mr Lawrance drew attention. That concerns the numerous emails sent by Mr Crombie to Mr Temelkov (and to Mr Tom Panayi) concerning the proposal of a company known as Logos Investment Pty Ltd to buy the head lease. 2. Logos made an offer to WSI (and, I think, to WSII, since it was sent to Mr Temelkov) to grant a sublease of Warehouses 1, 2 and 3 for a term of 10 years with an option for five years (in the case of Warehouses 1 and 3) and four years four months (in the case of Warehouse 2). Mr Crombie forwarded that proposal to Mr Temelkov on 26 February 2015. 3. On 2 March 2015, Mr Crombie sent a follow-up email to Mr Temelkov asking for his "feedback on this matter". 4. On 19 March 2015, Mr Crombie emailed Mr Tom Panayi on the subject of "Bumborah + other warehouse opportunities". That email read, relevantly, as follows: Hi Tom, I just wanted to check in on a few matters: 1. SALE: Bumborah Point Road We are aware that you have interest in this site, and should it not sell in the next week or so, we will come back to you. It is important to note that we have four interested parties to buy this site once the current Due Diligence expires. At this stage the current sale is still on track. 2. LEASE: Bumborah Point Road The original lease proposal is still valid today should you wish to proceed. We have been informed that should a lease not be signed prior to the sale exchanging, then it is likely this current offering will increase. At this stage this lease proposal has been issued to yourself and one other party, the proposed new owner is also talking direct to one other party. 3. Other Lease Opportunities We have reviewed the local South Sydney market above 5,000m² for lease and have attached these opportunities. 4. Sale Opportunities There are no existing buildings for sale in the current market that we are aware of over 5,000m². There is [sic] two land opportunities that we can talk about that can be traded, and we can subdivide these sites to suit your actual requirement. Settlement of this land would be in the next 6-12 months. I am available at any time should you wish to talk in more detail around any of the above. 1. Mr Temelkov sent what appears to be a reply to that email the same day. Mr Crombie replied to the reply. The email in its final form, reads (relevantly): Hi Michael, 1. Sale of Leasehold 11 Bumborah Pt Road Matraville – Can you please email me the sale of contract [sic]? We do not have a contract completed yet – still waiting on it 2. Can you please email me the updated lease that Logo's [sic] has proposed? This was verbalised in the last email to you, let me talk with Trent to get a hard copy put together – I thought a meet and great [sic] may have been better. 3. Thanks I will review 4. Thanks I will review [Italics supplied.] 1. For points 1 and 2, the italicised material following the question marks is Mr Crombie's reply to the question. That is apparent from his email in response, which says "Tom – notes below". 2. On 30 March 2015, Logos sent a revised proposal to Mr Crombie and Mr Crombie forwarded it to Mr Temelkov. Again, the revised lease proposal was for subleases of the three warehouses. 3. Logos revised its proposal yet again, on 15 April 2015. This time, Mr Crombie forwarded that revised proposal to Mr Tom Panayi. 4. Logos sent yet a further revised proposal to Mr Crombie on 22 April 2015. That proposal was addressed to Mr Tom Panayi. Mr Crombie forwarded it the same day to Mr Tom Panayi. 5. It is obvious that, by late February or early March 2015, Mr Temelkov must have become aware that Logos was intending to buy the head lease. It must have been obvious, when he received the very first proposal (on 26 February 2015), that Logos was intending to buy on the basis that WSI and WSII had no long-term subleases. If they did have long term subleases, Logos was in no position to make the offer it did unless it required the surrender of those subleases. None of the offer documents refers to that topic. Each of them is clearly drawn on the basis that Logos was buying with vacant possession. That must have been apparent to Mr Temelkov. 6. I have no doubt that Mr Temelkov discussed these proposals with Messrs Peter and Tom Panayi. I have no doubt that it must have been as apparent to them as it must have been to Mr Temelkov that Logos thought it was buying with vacant possession. I have no doubt that they must have realised that, so far as Logos was concerned, neither WSI nor WSII had a long term sublease. 7. The other notable thing about this chain of correspondence is that at no point did either Mr Temelkov or Mr Tom Panayi (or for that matter, Mr Peter Panayi or Mr Costi – although none of the emails were addressed to them) respond in writing to Mr Crombie to the effect that they already held long term subleases over the warehouses, and were not interested in considering Logos' proposal. Nor, for that matter, did they write thus to Logos. To my mind, it is not credible that, if any of those men truly believed that they had the benefit of long term subleases, they would have failed to point this out to Mr Crombie and to Logos and, for that matter, to Mr Toohey. 8. Thus, although I do not find that Mr Toohey told Mr Temelkov in November 2014 that he was selling the head lease because none of the options had been exercised and there were no long-term subleases, I find that, probably by 26 February 2015 and in any event by 19 March 2015, the defendants were aware, through Messrs Temelkov and Tom Panayi at least, that: 1. Bettervale was negotiating to sell the head lease to Logos; 2. Logos understood that it was negotiating to acquire the head lease with vacant possession; and 3. Logos was offering to sublease the warehouses to WSI and WSII on that basis. 1. To my mind, the failure of any of those men to controvert those obvious inferences, or to protest, provides a sure basis for inferring, as I do, that by those dates at the latest they well understood that they did not have any enforceable right to long term subleases. 2. As with so many other things in the evidence, that inference gains force when the material on the basis of which it is drawn is placed in context: specifically, in the context of searches undertaken by WSI and WSII for other accommodation. Those searches had commenced (so far as the evidence goes) in March 2013. They have continued virtually to the present time. Thus, they are contextually relevant not only to my assessment of the factual disputes just dealt with, but also to my assessment of other factual disputes, including the events of May and June 2014. I turn to those searches. The defendants' inspections of other business premises 1. There is no doubt that the defendants had been looking at other premises since March 2013. The documentary evidence includes some 23 emails, or email exchanges, dated between 25 March 2013 and 12 August 2015. Those emails related, by my count, to some 9 different sites. The most significant of those sites appear to be: 1. a property at 3 Coal Pier Road, Botany; and 2. a property at 2 Bumborah Point Road, Port Botany, also known as the "Old Visa Site". 1. The inquiries in respect of the Old Visa Site were intensive. They got to the point where WSII made a formal proposal to buy the head lease. 2. Mr Temelkov asserted that, before April 2015 at least, these were not searches for alternative properties but, rather, searches for additional properties. Messrs Peter and Tom Panayi gave evidence to similar effect, as did Mr Costi. I do not accept that aspect of their evidence. 3. None of them ever managed to explain, in a rational way that involved more than unsupported assertion, how it was that WSI and WSII, which apparently were happily accommodated at 11 BP Road, could suddenly require very substantial amounts of additional warehouse and hardstand space for the purpose of conducting their respective businesses. There were vague references to expansion, and alternatively, to the ability to sublet until such time as the businesses expanded sufficiently to take up the additional space. However, there was no documentation in evidence providing any, let alone any considered or detailed, analysis of, or presenting what might be called a business case for, taking on additional space. 4. The failure to provide any adequate justification, or to prove any consideration of a realistic business case, is not trivial or insignificant. If WSI (and/or WSII) had taken on any of the properties in addition to the warehouses at 11 BP Road, they would have been required to pay very substantial additional rentals. At a time when WSI could not afford the rental that was due under its sublease on Warehouse 1, the idea that it could take on additional warehouse space and somehow generate sufficient revenue to cover the rent (let alone, show a profit) is risible. 5. The absence of any evidence of detailed consideration or a business case is particularly stark in relation to the Old Visa Site. The head rental was $2,217,000.00 per annum, and outgoings payable by the lessee were $354,000.00 per annum. In addition, the existing lessee required a payment of at least $2 million as consideration for the assignment of the lease. WSII offered to pay $2 million as consideration for the assignment, if the payment could be staggered over time. It is inconceivable that WSII (with or without WSI) would have considered taking on that obligation (and the very substantial obligations for rent and outgoings) except as an alternative to its occupation of Warehouses 2 and 3 at 11 BP Road. 6. Some of the properties that were put before WSI or WSII were for sale. There is little evidence of the prices required. However, Mr Crombie indicated, in relation to one of the properties offered for sale, that the price was "circa $14.5 million" and, for another, that it was $13.5 million. 7. Some of the premises were for lease. The rentals sought were very substantial. In the case of three properties at 1 Hale Street Botany, the rentals asked ranged from $1.226 million to $2.072 million per annum. 8. The rental asked for the (or one of the) properties at 3 Coal Pier Road was about $1.95 million, with estimated outgoings exceeding $400,000.00 per annum. Those figures, which were taken from some form of brochure, were refined in an offer to lease from the proprietor, which sought rental of $1,892,750.00 per annum, together with outgoings of a little in excess of $400,000.00 per annum. 9. All those figures relate to properties put before Mr Temelkov in 2013 or 2014. 10. Mr Temelkov (reluctantly) accepted that from April 2015 onwards, the searches were for alternative, or replacement, rather than additional premises. He was cross-examined in reference to the Old Visa Site and gave the following evidence (T218.11-219.5): Q. and can I suggest to you that what you were doing from, at least, April 2015 was looking for alternative premises for WSI International? A. The intention was not to look for alternative premises. HIS HONOUR: I'm sorry, just repeat that. WITNESS: The intention was not to be looking for alternative premises. For additional premises, yes. LAWRENCE Q. Mr Temelkov, you knew there was a dispute about whether you had a long term lease for the site at Bumborah Point Road? A. Yes. Q. You knew that Mr Toohey was saying that you had only a month to month tenancy? A. After it's written letter, yes. Q. Are you content that you knew that from March 2015? A. I think it was a bit after March I received a letter from ABL. Q. You knew from 9 March 2015 that Mr Crombie was saying that you didn't have a long term lease? A. Yes. Q. So you inferred, didn't you, that that was Mr Toohey's position as well? A. Yes. Q. What you have done since that time is actively looked for new premises? A. For additional premises, yes. Q. You've looked for premises to move into so that you can move your business out of Bumborah Point Road. A. Yes. Q. As in relocating your business? A. Yes. Q. So since, at least, April 2015 do you agree that you have been looking for premises to which WSI International can relocate? A. Yes. Q. Not additional premises, premises to relocate to? A. Sure after all this has come out. 1. There are two notable features of this evidence. The first is that, even in relation to the Old Visa Site, Mr Temelkov at first sought to dissemble, and to suggest that it was required additionally rather than in the alternative to 11 BP Road. The second point is, obviously enough, that he was forced, ultimately to concede that he was looking for premises to which he could relocate the business of WSII. 2. What is also apparent from that passage of evidence is that Mr Temelkov effectively acknowledged that, by April 2015, he was proceeding on the basis that WSII would have to relocate: this follows, in my view, from his last answer "sure after all this has come out". 3. On 3 June 2014, Mr Crombie sent an email to a colleague. It appears to be accepted, and in any event I find, that the email related to WSII. The email read: Link 5000-20000 Lease Immediate Hale Street + 14a + 16 Baker Street 1. The obvious inference, which I draw, is that Mr Crombie was passing on to his colleague what he understood to be Mr Temelkov's requirements, including that the need for premises was "Immediate". Mr Temelkov accepted that he had told Mr Crombie that he was looking for a site between 5,000 and 20,000 m². He denied that he was looking for a lease with immediate commencement. I do not accept that denial. There was no reason for Mr Crombie to have thought that there was a need for immediate availability unless Mr Temelkov had told him that; and it is unlikely that Mr Crombie would have misunderstood Mr Temelkov's requirements so badly. 2. I should note that there was a dispute as to whether a Jones v Dunkel inference could be drawn against either Bettervale or the defendants because neither side called Mr Crombie. It seems to me that it was open to either side to call Mr Crombie. He had been retained by each of them. Bettervale had retained him to sell the head lease. The defendants (particularly, WSII) had retained him to find other accommodation. If I were to draw the inference, I would draw it against both sides; a pointless exercise. 3. Mr Crombie's email of 3 June 2014 to his colleague seems to me to suggest very strongly that WSII was looking for alternative accommodation. (The same inference is available from Mr Crombie's prior email, of 12 February 2014, to Mr Temelkov.) That reading of the emails is supported by an email that Mr Toohey had sent to Mr Temelkov some months earlier, on 5 August 2013. At that time, Messrs Toohey and Temelkov were having a disagreement as to liability to repair damage to the concrete hardstand. That disagreement seems to have arisen in the context of a dispute as to unpaid rent. In the course of that email, Mr Toohey said: That's wear and tear Tom. We could do a deal to systematically fix areas of the yard. Bettervale would be within their rights to charge you 100%. I know you are looking at alternative properties possibilities and if you move out or are moved out for not paying rent, you would have to pay for repairs as is plainly set out in the make good area of the lease. … 1. Mr Temelkov's only reply was: Brian, can you call me tomorrow. I have just read your email. 1. Mr Temelkov was cross-examined on that email exchange. He gave the following evidence (T192.30-193.22): Q. If you just go back to page 212-1? A. Yes. Q. You will see there's an email from Mr Toohey to yourself on 5 August at 8.36am? A. Yes. Q. You see that he sets out some reasons why he says it is wear and tear, do you see that? A. Yep. Q. Do you see there's a line where he says, "I know you are looking at alternative properties possibilities."? A. Yes. Q. That was true, wasn't it? A. No, sir, it wasn't true. Q. You didn't correct him, did you? A. I haven't corrected Brian on a lot of things, sir. Q. Do you have your affidavit in front of you? A. Yes. Q. Do you see in paragraph 83 that you say you had a conversation with Mr Toohey in which he asked you whether you intended to stay on, and you said, "Yes, of course we do."? A. Yes. Q. In the latter half of 2013 Mr Toohey was saying to you that he knew you were looking at alternative properties possibilities, wasn't he? A. Yes, it says that there - that's correct. Q. You did not correct him? A. I did reply to the email. I don't know why there's no reply back from me? Q. Mr Temelkov, the conversation that you set out in paragraph 83 did not happen, did it? A. Yes, it did, sir. Q. Because you see in the latter half of 2013 what Mr Toohey was saying was that he knew you were looking at alternative properties, wasn't he? A. Totally incorrect. Q. He was saying that to you, wasn't he? A. Brian was saying that to me? 1. In my view, Mr Temelkov was dissembling when he said "I haven't corrected Brian on a lot of things, sir" and when he said that he did reply to the email. The only reply in evidence is the one that I have quoted. The obvious inference (and I draw it) from that email exchange is that, as Mr Toohey said and Mr Temelkov did not deny at the time of the email exchange, Mr Temelkov was indeed "looking at alternative properties possibilities". 2. I do not propose to go through all of the emails and other material bearing on this dispute. There is nothing inconsistent with what to my mind is the inevitable conclusion, namely that, as I find, WSII was indeed looking for alternative (not additional) accommodation from at least March 2013 onwards. 3. The material supporting that conclusion includes: 1. Mr Toohey's email of 5 August 2013 and Mr Temelkov's very limited reply to it; 2. Mr Crombie's email to Mr Temelkov of 12 February 2014; 3. Mr Crombie's email to his colleague of 3 June 2014, setting out his understanding of Mr Temelkov's requirements; and 4. the sheer implausibility of the proposition that WSII was financially and otherwise in a position to take on additional expenditures of the very substantial amount required, if in truth its searches were for additional rather than alternative accommodation. 1. There is no suggestion that Mr Temelkov was going on a frolic of his own, when he looked at alternative properties. On the contrary, Mr Temelkov said that he discussed many of the potential new premises with Messrs Peter and Tom Panayi, and indeed with Mr Costi. He said (T181.21-.43): Q. You see from 2012 onwards you were actively exploring new property options for WSI International? A. Yes, that's correct, yes. Q. You discussed them with Tom Panayi; do you agree? A. Yes, Tom was involved in some of them, not all of them. Q. You discussed them with Peter Panayi? A. Yes, Peter was involved in some of them as well; that's correct. Q. Let's see, doing your best, if you can recall which ones you discussed with Tom Panayi and Peter Panayi. Do you remember I showed you a communication about 1901 Botany Road? A. Yes. Q. Did you discuss that with Tom Panayi? A. That was discussed with Tom and several other people? Q. Who were the other people? A. Andrew and- Q. Andrew Costi? A. Yes. 1. He was then taken through all the many other properties comprised in Bettervale's exhibit PX6. I do not think that it is necessary to set out or summarise the detail of that cross-examination. 2. In my view, the obvious – indeed inference inescapable – is that it was not just WSII, but also WSI, that was looking for alternative (not additional) premises from early 2013 onwards, and I so find. 3. Nor is it improbable that the defendants would have been looking at alternative premises, even as early as 2013. They must have realised that, subject to any exercise of the options, their subleases would expire in mid-2014. It would be prudent for businessmen in their situation to look at the question of alternative accommodation. The availability, suitability and price of alternative accommodation would be very important matters to take into account in deciding whether or not to exercise the options. 4. Further, as a chronology of the relevant inquiries would show, the searches and inspections intensified from April 2014 onwards. Significantly, they intensified after Mr Crombie had reminded Mr Temelkov (if he needed reminding) of "your current lease expiry" in the email of 12 February 2014. Again, it is entirely understandable that the defendants would do so. And it is equally understandable that (as the chronology shows) their inquiries intensified further following the "market assessment" emails of 5 May 2014. 5. In my view, those inquiries, and the purposes for which, I find, they were made, are entirely inconsistent with the proposition that, at the same time, the defendants had given oral notice of exercise of their options. As I have said already, I find that the defendants were not prepared to commit themselves to any further subleases at 11 BP Road unless and until they were assured that the rentals would be acceptable to them. Conclusions on the evidence 1. My conclusions and findings on the central contests of fact identified by Mr Pritchard (see at [82]), and as to the tennis club meeting, are as follows: The tennis club meeting 1. I find that the best record of what was said in the tennis club meeting is to be found in Mr Toohey's email to Ms Lam of 13 August 2012, copied thereafter to Mr Peter Panayi. I do not find that there was any agreement, whether for a new lease or otherwise, other than as set out in that email. Understanding of the renewal provisions of the sublease 1. I am satisfied that all relevant parties were aware of the renewal provisions in the subleases well before 5 May 2014. Further, I find that all were so aware before any of the option windows closed. 2. As to Mr Toohey, I find that he was so aware from 4 October 2013. 3. As to Mr Tom Panayi and Mr Temelkov, I find that they were so aware from February or March 2014. 4. As to Mr Peter Panayi, I find that he was so aware from, at the latest, early March 2014. The market assessment emails 1. I find that Mr Toohey's market assessment emails of 5 May 2014 were not sent in response to any notice (oral or otherwise) of exercise of the options. I find that neither WSI nor WSII was up to or at that time prepared to commit itself to the exercise of its option or options (even if exercise were still open) and that neither had given notice of exercise (orally or otherwise). 2. I find that Mr Toohey sent the emails to inform WSI and WSII of the rents that would be charged for the warehouses (as to Warehouses 1 and 3, if they wished to seek a new lease; as to Warehouse 2, if the option were exercised). Oral notices of exercise of options after 5 May 2014 1. I do not find that Mr Temelkov gave any oral notice of exercise of option after 5 May 2014. I do not find that Mr Peter Panayi gave any oral notice of exercise after 5 May 2014. Nor did Mr Tom Panayi do so. 2. I find that Mr Peter Panayi gave instructions to Mr Tom Panayi to seek draft new subleases from Bettervale, as though there had been some agreement to grant them. I find that this was part of a plan concocted by the defendants to make it appear that there had been some prior agreement, although they knew full well that there had been no exercise of option. Oral requests for new subleases 1. I find that Mr Temelkov did ask Mr Toohey on at least one occasion "where are the new leases" and that Mr Toohey replied suggesting that preparation of the new leases was in hand. I find however that Mr Temelkov was seeking to create the impression that there had been some prior dealings that might give rise to an entitlement to new subleases when in fact he knew that the options had not been exercised. I find that Mr Temelkov had no belief in fact that WSII had any entitlement to or agreement (whether enforceable in law or not) for the grant of renewed or fresh subleases. 2. I do not find that Mr Temelkov said to Mr Toohey in June 2014 that WSII would accept the new rent if it had no alternative. The preparation of and failure to issue new subleases 1. I find that Mr Toohey instructed Ms Lam to instruct Mr Pederick to prepare draft new subleases, and that he did so upon receipt of Mr Tom Panayi's email of 5 June 2014 asking for "the new lease agreement for W1". 2. I find that Mr Pederick did prepare draft subleases, and that he sent them to Mr Toohey on 19 June 2014. 3. I find that Mr Toohey gave instructions for the preparation of the draft subleases because, at the time, he was prepared for Bettervale to grant them if the defendants would agree to the rents specified in the emails of 5 May 2014. I do not find that he gave instructions for the draft subleases to be prepared because he understood or believed that the defendants then had any agreement (whether or not enforceable) for them, whether by way of exercise of options or by way of agreement for new subleases. The November 2014 conversation 1. I find that Messrs Toohey and Temelkov met on site at 11 BP Road in November 2014. I find that Mr Toohey told Mr Temelkov that Bettervale was going to sell the whole site. 2. I find that Mr Toohey did not tell Mr Temelkov at that meeting that Bettervale could sell the site because no one had exercised their options. 3. Nonetheless, I do find that by November 2014, both defendants, and their principals, well understood that they had not given notice of exercise of their options (oral or otherwise) and that there had been no agreements (whether enforceable in law or otherwise) for the grant of new subleases. The defendants' inspections of other premises 1. I find that the defendants had been looking at other premises, from which their businesses could be conducted, since March 2013. I do not find that any of those inspections were for the purpose of taking additional accommodation. I am not satisfied that at any relevant time the defendants had the desire, let alone the financial capacity or the business need, to take on additional premises. 2. I find that from mid-February 2014 at the latest, the defendants were actively searching for alternative business premises knowing that they had not exercised their options for renewal, whilst knowing that in each case it was still open to them to do so. Resolution of the issues 1. In most cases, my conclusions on the real issues will be obvious from what I have just said. Accordingly, in most cases, I will state my conclusions in summary form. The summaries should be read against the detailed consideration of the individual factual disputes. The tennis club meeting 1. There was no agreement reached at the tennis club meeting in relation to renewal of the subleases beyond their then expiry date. There was an agreement, documented in the email of 13 August 2012, to accept a reduced rental from WSI for Warehouse 1. That agreement did not enure past the then current expiry date of the sublease for Warehouse 1. There was no further agreement, whether or not enforceable. 2. In short, as I have said more than once, the best evidence of what was agreed is contained in that email. Estoppel: exercise of options for renewal 1. Since I have found that none of the defendants gave oral notice of exercise of option, no question of estoppel can arise. In any event, given my views as to the credibility of the defendants' witnesses and the absence of any corroboration, I do not find that there was any act or silence on the part of Bettervale that could ground an estoppel in relation to the purported oral exercises of option. 2. Nor is there any basis for finding detrimental reliance. The defendants understood from 12 February 2014 or shortly thereafter that Bettervale was asserting that they had not exercised their options for renewal. The defendants' principals were well aware, by early March at the latest, of the terms of the options for renewal and of what was required for valid exercise. 3. The defendants' failure to give valid notice of exercise of options after 12 February 2014 was not based on any reliance on anything said or done (or omitted to be done) by Mr Toohey. On the contrary, Mr Toohey's position was clear to them, before the option windows closed. The defendants did not give valid (or any) notices of exercise of option, because they were not prepared to commit themselves to renewed leases, knowing (as I have found they did) that the rentals could be increased on renewal. Estoppel: new agreements for lease 1. Since I have found that there were no oral agreements for new leases, again no question of estoppel could arise. 2. Further, given my findings as to the genesis of the market assessment emails of 5 May 2014, and my findings as to the subjective intentions of both Bettervale (through Mr Toohey) and the defendants (through their principals), there is no basis from inferring from the documentary evidence any agreements, whether or not enforceable, for the grant of new subleases. 3. For essentially the reasons I have given in relation to estoppel in the context of exercise of the options, there is no basis for finding any detrimental reliance on anything said or done (or omitted to be done) by Mr Toohey. Further, in the case of the asserted fresh agreements for lease, the defendants understood that Mr Toohey would only be prepared to grant new subleases on the basis of the rentals set out in his emails of 5 May 2014. The defendants were never prepared to pay those rentals. Their decision not to enter into new subleases was based on their attitude as to the rentals, not on reliance on anything said or done (or omitted to be done) on Mr Toohey's part. New agreements for sublease; part performance 1. Since I have found that there were no new agreements for sublease, the question of part performance does not arise. 2. I accept that Mr Toohey's market assessment emails of 5 May 2014 set out the basis on which Bettervale would be prepared to grant new subleases. However, as I have said, the defendants did not accept any offer that might be construed from the terms of this email. Nor did they perform the offered terms. On the contrary, WSI declined to pay the rent demanded for Warehouse 1. WSII declined until February 2015 to pay the rent demanded for Warehouse 3. It accepted and paid the reduced rental for Warehouse 2, but that of itself could not be sufficient part performance to bind Bettervale to any contract that might have arisen. The offer made by Bettervale was not severable. Misleading or deceptive conduct 1. As the case was run, and as in any event is quite clear, the defendants' cases as to misleading or deceptive conduct, in relation to the asserted oral notices of exercise of option and oral agreements for new subleases, go nowhere, on the findings I have made. 2. The question of misleading or deceptive conduct does have some continued vitality, in relation to the continuing basis on which the defendants have occupied the warehouses. That is apparent from the way that Mr Pritchard formulated his fifth issue. 3. As to that, I find that the defendants remained in occupation from month to month not in reliance on anything said or done (or omitted to be done) by Mr Toohey, but rather, because it suited them to do so. The defendants did not accept the proposal (to use a neutral term) set out in Mr Toohey's market assessment emails of 5 May 2014. They were not (in the case of WSI, at any time; and in the case of WSII, up until February 2015) prepared to pay the rentals demanded. Their subleases were terminable on a month's notice. That was due not to anything said or done, or omitted to be done, by Mr Toohey. It was due to their own, as I find conscious and advertent, failure to exercise their options for renewal or to take up such offer as might be spelled out from Mr Toohey's 5 May 2014 emails. Relief against forfeiture 1. On the findings that I have made, this does not arise. If it did arise, I would hold that WSI should not have such relief. 2. On the evidence as a whole, there is no basis for thinking that WSI could pay the rent demanded in the relevant email of 5 May 2014. Indeed, it could not even pay the rent originally reserved under the sublease. That was the whole reason for the tennis club meeting, and the rationale for the agreement reached at that meeting. In my view, it would be quite extraordinary to order relief against forfeiture in favour of a defendant when the likelihood is that the defendant could not meet its obligations in any event. 3. Allied to that, there is the consideration that WSI has in effect sought to bargain with the Court. Mr Peter Panayi said that it would pay the arrears of rent due up to 30 June 2014 if granted a new sublease, but not otherwise. A defendant who seeks to trifle with the Court in that way should not have the exercise of the Court's discretion, to grant relief against forfeiture, in its favour. 4. Further, and importantly, the rights of a third party, the purchaser of the head lease, have intervened. WSI knew through Messrs Peter and Tom Panayi, that Bettervale was seeking to sell the head lease. Indeed, WSI (and WSII) sought to bargain with the prospective incoming head lessee to take new subleases from it. 5. That knowledge must be imputed to WSI by late February or early March 2015 at the latest. It stood by and allowed the negotiations to continue. It did so, knowing (for all the reasons I have given) that Bettervale was selling, and Logos was buying, on the basis that Bettervale could give vacant possession. It did nothing then, or at any relevant time, to inform either company that it was not in a position to sell or buy on that basis. 6. In those circumstances, it seems to me, the intervening rights of the third party purchaser, acquired whilst WSI, having knowledge of the negotiations, stood by and failed to assert their claimed entitlements, is enough of itself to dictate the refusal of relief against forfeiture. 7. I should make it quite clear that I am talking both about the statutory discretion embodied in ss 133C–133G of the Conveyancing Act 1919 (NSW) and of relief on general equitable principles. Orders 1. The remaining issue is that of the relief sought. It is clear from what I have said that Bettervale has made out its claim to judgment for possession, and an order that a writ of possession should issue. That conclusion raised the question of staying the execution of that writ for enough time to enable the defendants to vacate. 2. The defendants suggested that it would take three months for them to vacate in an orderly fashion. That may be so. However, in circumstances where they have known for more than a year that their tenancies are monthly (and where they have known for longer than that that there were no exercises, valid or otherwise, of their options for renewal), I did not think it proper to give them three months. 3. The first point, which I have adverted to already in connection with relief against forfeiture is that the rights of a third party, the purchaser of the headlease, have intervened. That contract is due for settlement on 30 September 2015. If the defendants do not vacate by then, the purchaser as I understand it would be entitled to terminate the contract. Whether or not it would do so (a question that Mr Pritchard raised) is beside the point. The point is that if such termination occurred, it would not only put Bettervale at risk of damages for breach, it would also mean that Bettervale lost the benefit of the contract. 4. The second point is that the situation is entirely of the defendants' making. They have had more than ample time to move, including since July 2014 when, on any view, it must have been apparent to them that the need to move was likely to become insistent. There is no reason for the defendants to be rewarded for their own tardiness. 5. Next, the defendants' assessment of the time required assumes a very orderly process. However, on the evidence, they would be able to clear out, and to safeguard their customers' property, in a much quicker time. That might cause them some loss of business. But again, that is a consequence of their own inaction, and their own decision to remain rather than move. If the question is whether Bettervale or the defendants should bear the consequences of the defendants' inaction, the answer to my mind is obvious. It must be the defendants who do so. 6. The remaining question is Bettervale's claim against WSI for arrears of rent. There are two components to that claim. One is for arrears up until 30 June 2014. The other for arrears from 1 July 2014. 7. The former claim is effectively not disputed. Bettervale is entitled to judgment for the amount claimed by it. 8. There is a difficult question as to the second claim. Bettervale has sought judgment for arrears of rent, not for mesne profits. Its claim is based upon the proposition that the rent stipulated in the 5 May 2014 email addressed to WSI is recoverable. But even if that email were to be taken as making an offer on the terms set out, the simple fact is (as Mr Lawrance submitted in another part of his case) that the putative offer was not accepted. There has been no agreement as to rental for the period from 1 July 2014. 9. That is not the end of the question. The relevant sublease gave Bettervale the right to increase the rental payable during the period of any holding-over. See at [24] above, incorporating the terms and conditions of the head lease, including those set out at [18]. The email of 5 May 2014 referred to "market assessment". It was not effective for that purpose. However, in my view, it should be characterised as an exercise of whatever power was available to Bettervale to increase the rent from 1 July 2014. On that basis, in my view, Bettervale has made good its claim for rent up until the date of judgment. Conclusion 1. It was for those reason, which were summarised in my brief oral reasons, that I made the orders I did on 10 September 2015. Those orders were: 1. Pursuant to s. 74MA of the Real Property Act 1900 the First Defendant withdraw Caveat AJ573618C forthwith. 2. The Plaintiff has judgment for possession of that part of the land at folio identifier 20/1068292 the subject of the sub-lease dated on or about 15 October 2009 between the Plaintiff and the First Defendant (Warehouse 1 Sub-lease). 3. The Plaintiff has leave to issue a writ of possession forthwith for that part of the land at folio identifier 20/1068292 the subject of the Warehouse 1 Sub-lease in the form annexed to these orders and marked "A" (Warehouse 1 Writ). 4. Provided that the First Defendant pays into Court, no later than 14 September 2015: 1. the rent payable in respect of Warehouse 1 for the period from 18 July 2015 up to 30 September 2015; execution of the Warehouse 1 Writ be stayed until 29 September 2015. 1. The Court directs that the Warehouse 1 Writ be executed by no later than 30 September 2015. 2. Judgment for the Plaintiff for $833,467.24. 3. The First Cross-Claim be dismissed with costs. 4. Pursuant to s. 74MA of the Real Property Act 1900 the Second Defendant withdraw Caveat AJ549272A forthwith. 5. The plaintiff has judgment for possession of that part of the land at folio identifier 20/1068292 the subject of the sublease dated on or about 20 August 2010 between the Plaintiff and the Second Defendant (Warehouse 2 Sub-lease). 6. The plaintiff has leave to issue a writ of possession forthwith for that part of the land at folio identifier 20/1068292 the subject of the Warehouse 2 Sub-lease in the form annexed to these orders and marked "B" (Warehouse 2 Writ). 7. The plaintiff has judgment for possession of that part of the land at folio identifier 20/1068292 the subject of the sublease dated on or about 16 October 2009 between the Plaintiff and the Second Defendant (Warehouse 3 Sub-lease). 8. The plaintiff has leave to issue a writ of possession forthwith for that part of the land at folio identifier 20/1068292 the subject of the Warehouse 3 Sub-lease in the form annexed to these orders and marked "C" (Warehouse 3 Writ). 9. Execution of the Warehouse 2 Writ and the Warehouse 3 Writ be stayed until 29 September 2015. 10. The Court directs that the Warehouse 2 Writ and the Warehouse 3 Writ be executed by no later than 30 September 2015. 11. The Second Cross-Claim be dismissed. 12. The Defendants pay the Plaintiff's costs of the proceedings. The Court declares that: 1. The notice to quit dated 12 June 2015 issued by the Plaintiff to the First Defendant is a valid notice of termination under the terms of the Warehouse 1 Sub-lease. 2. The notice to quit dated 12 June 2015 issued by the Plaintiff to the Second Defendant is a valid notice of termination under the terms of the Warehouse 2 Sub-lease. 3. The notice to quit dated 12 June 2015 issued by the Plaintiff to the Second Defendant is a valid notice of termination under the terms of the Warehouse 3 Sub-lease. Otherwise the Court: 1. Directs that the Plaintiff negotiate in good faith with the purchaser of the lease the subject of Warehouse 1 sublease, Warehouse 2 sublease and Warehouse 3 sublease for an extension of the sunset date under the contract for sale of land between the Plaintiff and the purchaser for a further term beyond 30 September 2015 and to inform the defendants and the Court of the outcome of that negotiation as soon as practicable. 2. Grants liberty to apply in respect of orders 4, 5, 6, 13 and 14. 3. These orders be entered forthwith. ********** 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: 21 September 2015