Supreme Court New South Wales Medium Neutral Citation: Taste of Tuscany Restaurant Pty Limited v Papantoniou [2017] NSWSC 932 Hearing dates: 11 July 2017 Date of orders: 12 July 2017 Decision date: 12 July 2017 Jurisdiction: Equity Before: Pembroke J Decision: See paragraph [30] Catchwords: CONTRACT – existence of agreement – no concluded agreement – no intention that parties be bound prior to a formal lease being duly executed Legislation Cited: Retail Leases Act 1994 Cases Cited: Allen v Carbone (1975) 132 CLR 528 Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540 (CA) Brogden v Metropolitan Railway Co (1877) 2 AC 666 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR 15,145 (CA) Category: Principal judgment Parties: Taste of Tuscany Restaurant Pty Limited - plaintiff George Papantoniou – first defendant Eugenia Papantoniou – second defendant John Papantoniou – third defendant Stella Papantoniou – fourth defendant Aristotelis Papantoniou – fifth defendant Efthemia Papantoniou - sixth defendant Representation: Counsel: V R Gray – for the plaintiff S Jacobs – for the first, second, third and fourth defendants M W Sneddon – for the fifth and sixth defendants Solicitors: Corporate and Civil Legal – for the plaintiff Nicholas Angelos & Co – for the defendants File Number(s): 2014/286668 Judgment Introduction 1. By summons filed on 30 September 2014, the plaintiff sought an order against the defendants for specific performance of a supposed agreement to lease. Two years later, after having been continuously in occupation and conducting its restaurant business on the premises, it added an alternative claim for restitution for the moneys it had paid by way of 'rent'. At the date of the hearing, it was still in occupation and conducting its business. It has now purported to exercise an option to renew for a five year term. 2. The defendants are the registered proprietors of a small shopping centre in Pennant Hills Road, Carlingford. They are the elderly parents of three Greek families. They own the land as tenants in common as between each set of parents. In the negotiations with the plaintiff, their representatives were certain members of the next generation of the family. In particular, the third and fourth defendants were represented by Chris Papantoniou and later by Peter J Papantoniou, and the fifth and sixth defendants were represented by Panos Papantoniou. 3. The premise on which the plaintiff's claim for specific performance rests is that there was a binding agreement for the lease by the defendants of one of the shops. I am afraid that the evidence does not support such a conclusion. And the alternative claim for restitution to cover the moneys paid by the plaintiff must also fail. There can be no unjust enrichment in the circumstances. None was realistically identified. The Correspondence and Communications 1. An examination of the correspondence and communications between the parties reveals that there was no concluded agreement on the terms of the lease for which the plaintiff contends. Negotiations had in fact been going on for almost twelve months before May 2012. On 7 May 2012, the then solicitor for the plaintiff, Mr Wehbe, wrote to the solicitors then acting for all defendants, proffering a lease signed by George Kiss, the sole director of the plaintiff. It matters not that the draft form of lease had originally been sent to Mr Wehbe by the defendants' solicitors many months before. 2. The terms of the draft lease deserve careful attention. The commencement date was to be 1 July 2011. The term of the lease was to be five years. There were to be two five year options to renew. The first option period, if exercised, was to be from 2016 to 2021. The second option period was to be from 2021 to 2026. The draft lease also provided that s 35 of the Retail Leases Act 1994 applied and would commence at the end of the first option period, that is 2021. The draft also amended the standard provision under the Act relating to notice in the event of intended demolition, from six months to twelve months. The effect was that any demolition of the shop and redevelopment by the defendants could not reasonably take place for a period of ten years. 3. On 22 May, several weeks after the plaintiff's solicitor proffered the signed draft lease, Panos communicated with the other representatives of the defendants and requested a meeting. He said, 'Looking forward to your replies and getting this tenant/lease sorted out once and for all' (emphasis added). A meeting was duly arranged for the weekend. It took place on Sunday 27 May. 4. Peter J Papantoniou, whom I was told was a professor of medicine and whose correspondence appears to have been sensible and moderate, wrote to all other family representatives following the meeting. He said that he spoke to George Kiss after the family meeting. His email said in part: He tried the angry then not angry approach. Said he has had enough and wanted to leave at the end of his lease next year, then he said he wanted a lease and had signed it. He said he would not sign a lease with a demolition clause of less than ten years. He said he would not spend the money doing up the shop for a demolition clause after five years … I told him that we had no plans for his current works. We had no approved DA from Parramatta Council … I said we needed his plans and they needed to be approved by the council and included in the lease. 1. The email concluded with the following statement: We left it at: He wants a lease but with a demolition clause after ten years, not five years. He would give back the shop next to the aquarium as it was. He would keep the smaller shop. He would do his changes within the shops that he keeps. I wanted him to send me an architect's plan on his changes. He was to get a DA approved for these changes. I would arrange a lease for the above after discussion with you all and approval. (emphasis added) 1. There was no evidence of the contemplated subsequent 'approval' as between the family members. Quite the opposite. Later on Sunday 27 May, Panos responded with a number of objections. And Peter J Papantoniou wrote to George Kiss summarising the matters that he required. On Monday 28 May George Kiss responded by saying, 'Will get back to your questions in a couple of days, waiting for some documents to forward to you'. Peter J Papantoniou responded, 'Please get back to me as soon as possible so I can get a final lease drawn up for you' (emphasis added). 2. It is not clear whether the communications between Peter J Papantoniou and George Kiss after the family meeting on Sunday 27 May were in person or by telephone. It does not matter. The email from Peter J Papantoniou to George Kiss commenced with the words 'as per our meeting today'. If there had been a prior concluded agreement on the terms of the draft lease attached to the 7 May letter from Mr Wehbe, then there was no need for a meeting with George Kiss on 27 May or any further negotiations with him. Nor would there have been any need for negotiations and discussions within the family representatives of the defendants. 3. On Tuesday 29 May, Panos responded to Peter J Papantoniou and the other family members by saying, 'PLEASE STOP all communications with Tuscany. Just came out of conference with retail and commercial law expert'. Later on 29 May, he set out in more detail a number of concerns which he had about the proposed lease. He thought it was one-sided. He had clearly been talking to his father, who apparently suggested cancelling all talks with George Kiss regarding a new lease until further notice. 4. Among other things, Panos stated that the rent had been previously reduced and that 'none of the conditions of this reduction have been met'. He said that the failures by the plaintiff included the failure to refurbish shop 7 as promised in the DA application; unauthorised and non-approved works that had taken place without landlord consent; the failure to hand back the shop on 1 January 2012 as promised; and the failure to undertake repairs to the roof which had been considerably damaged by unauthorised modifications by the tenant. 5. On 30 May, George Kiss responded to Peter J Papantoniou and set out his response to the various matters raised in his 27 May email. He insisted that the lease he required was the version forwarded by his solicitor on 7 May, which included a ten year demolition clause. He listed a number of matters that were agreed, one matter that was not agreed with a qualification, and other matters that were noted. He said that he had received advice. 6. On 30 May, Panos wrote to all family representatives advising them, 'Do not reply or confirm anything to George Kiss'. His email added: Angela, PJP [Peter J Papantoniou] has agreed to drafting a letter to be sent to George Kiss. Once ready, it will be first sent to all three of us to approve and then sent to George's lawyer. (emphasis added) 1. It does not appear that any such approved letter ever came into existence. On the same day, Panos forwarded advice from a solicitor whom he had consulted relating to the entry into the proposed lease. It included the statement that 'An express statement should be made that the lessors do not consider themselves bound by any such proposal by the lessee'. 2. That summary of the evidence fails to demonstrate that there was a concluded bargain on all of the terms of the lease. Nor does it satisfy me that, even if the terms could be said to have been agreed, the parties intended that any such agreement would operate immediately before a formal lease was duly executed by all parties. There was no evidence of further negotiations leading to any consensus. The trail effectively stopped in late May 2012. It appears that the defendants could not agree and fell into separate camps. Evidence of George Kiss 1. The evidence of George Kiss, the sole director of the plaintiff, did not advance the plaintiff's case. Indeed it confirmed the views that I have formed from an objective review of the correspondence and communications. George Kiss well understood that none of the defendants had signed the lease. And he understood the significance of them not having done so. He knew in May 2012 that the defendants were going to 'continue discussions' in relation to the finalisation of a lease. He expected a copy of the lease to be signed and sent back to him. He thought it was the law. He knew it was not only the law but normal practice. 2. It was clear that George Kiss wanted the new lease not merely for security of tenure but because he needed the protection of a lease before commencing major building improvements and refurbishment of the current restaurant. He spoke to his solicitor Mr Wehbe around 28, 29 and 30 May. His solicitor in fact gave him advice which led him to respond on 30 May to the 27 May email from Peter J Papantoniou. That included advice that he should stipulate "not agreed" in relation to point number 5 in that email. 3. George Kiss was conscious that by May 2012 there had been twelve months of negotiations, which he said were frustrating. He gave the following evidence: Q. And at the end of that period you still did not have a signed lease? A. From the landlords, no. Q. And you knew from past experience that a signed lease would give you security of tenure of the property? A. Yes. 1. Then a little later on: Q. Well, you took a risk in this sense, you had been seeking to get a signed lease for twelve months? Q. And your attempts to get a signed lease have been unsuccessful? A. Yes. Q. You knew that a signed lease would give you security? A. Yes. Q. And you knew that there must be some risk if you didn't have a signed lease? A. Yes. 1. At the conclusion of his cross-examination I asked Mr Kiss the following: Q. Do you agree that from May 2012 you took a calculated gamble? A. Risk, yes. Q. And you did that, by the way, because of the advice from a solicitor? A. That's right. Q. That was the factor which influenced your decision to take the calculated gamble? A. That is correct. 1. To the extent that the plaintiff relied somewhat unconvincingly on an estoppel, the reliance by Mr Kiss on his solicitor's advice makes clear that no such argument can succeed. If Mr Kiss mistakenly held the belief that he had a concluded agreement, or that he had the security of tenure that a signed lease would have given him, then the cause of that erroneous belief appears to have been his former solicitor. The fault may well lie with him. 2. However, I am somewhat sceptical about the reality of the advice by the solicitor. And I do not know what information was given to him. Mr Wehbe was not called although he was available to give evidence. What is clear, however, is that from May 2012, there was no reasonable reliance by the plaintiff on any representation or conduct by the defendants as to the existence of a binding formal lease; one whose terms had been fully agreed; one which was objectively intended to be legally binding before being duly executed. Even though rent was paid and accepted, that remained the position. And George Kiss remained conscious of the precariousness of the state of affairs in which he was placed. Existence of Agreement 1. The question of the existence of an agreement is to be resolved by ascertaining the objective intention of the parties as disclosed in their correspondence and communications viewed in the light of the subject matter and the surrounding circumstances: Allen v Carbone (1975) 132 CLR 528, Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR 15,145 (CA) and Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540 (CA). 2. In this case, when those communications, correspondence and circumstances are reviewed, there is in my view no support for the contention that the parties reached a concluded bargain intended to be immediately legally enforceable on the terms of the draft lease proffered by the plaintiff's solicitor on 7 May 2012. That draft lease was no more than an offer. The evidence does not support the inference that the offer was ever accepted; let alone that any acceptance was communicated. 3. Furthermore, it is clear that Mr Kiss knew the offer was never accepted and understood the risks of not securing acceptance of his offer. It is well established that an offeror may not impose a contractual obligation on an offeree simply by putting forward his offer and relying on a failure to expressly reject it: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 527. 4. This is not one of those cases where it could be said that the course of dealing and the conduct of the party to whom the agreement was propounded was such as to lead to the inference that: those with whom they dealt were made aware by that course of dealing that the contract which they had propounded had been in fact accepted. 1. Brogden v Metropolitan Railway Co (1877) 2 AC 666 at 682 (Lord Hatherley). Given the communications in May 2012, and George Kiss's knowledge and understanding of his position, the payment of a monthly 'rental' by the plaintiff, and its acceptance, does not advance the plaintiff's case 2. I should add that the nature of this lease, the length of its term, including the options for renew and the significance to the defendants of the demolition clause arrangements, are such as to indicate that it is unlikely that the parties intended to be bound informally before any signed lease was agreed and duly executed. The following statement by Moffitt P, Reynolds and Samuels JJA in Pan American World Airways v Commonwealth at 3 – which concerned a lease transaction – is apposite: The subject matter of a contract or the character of its parties or of a party may be such that a formal written contract offers such advantages as against a less formal agreement that when it appears that the parties in fact contemplated the execution of a formal contract, it is inherently unlikely that they mutually intended to bind themselves by some earlier informal consensus. The disadvantages of having to depend upon the uncertainties inherent in informality, providing as they do fertile fields for dispute as to the existence of the contract or as to its terms where the rights of the parties have to be spelt out of conversations or correspondence or both, may assume substantial significance in some classes of contract or for some types of parties. Orders 1. For those reasons, I make the following orders: 1. I order that the summons be dismissed. 2. I give judgment for the defendants on the amended statement of claim. 3. I order the plaintiff to pay the defendants' costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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: 13 July 2017