Was there an agreement for lease?
41 The primary judge addressed the question whether there was a contract constituted by the correspondence. This was the question posed by the amended summons. Unfortunately, there was in this case no pleading and no statement of issues. However, in addresses, counsel for the appellant put this:
The critical issue is not whether a contract was brought into existence at the point of returning that letter signed, but more so whether there was a contract brought into existence or whether there was a contract in existence at the time that the plaintiff took possession of the premises which was the commencing date of a proposed lease and in the circumstances being 4 March 2003.
42 Accordingly, in my opinion, it was and is necessary to address the question of the existence of an agreement for lease at two points of time: on or about 24 September 2002 and on or about 4 March 2003.
43 In the primary judge's judgment, there is no clear separation of these two times. On the one hand, he posed the question as addressing only the effect of the correspondence; but on the other hand, he took into account later negotiations in concluding that important issues had not been resolved.
44 As at 24 September 2002, there was no uncertainty or disagreement either as to the terms of the option (the respondent had signified its agreement to the appellant's proposal) or as to the property to be included in the lease (the question of the adjoining vacant land had not yet been raised). However, there was some uncertainty as to the commencement date of the lease: the date of 10 October 2002 was only the respondent's indication of a proposed commencement date, and in any event, there was no suggestion that this was accepted by the appellant so as to bind both parties.
45 If there is agreement as to the terms of a lease, apart from a starting date, agreement as to an event that will trigger the start of the lease, and also manifestation of an intention to enter into a binding legal relationship, then the absence of an agreed starting date would not prevent there being an agreement for lease: cf Pirie v Saunders (1961) 104 CLR 149 at 152.
46 However, in this case there was not, as in Pirie, an agreement that commencement should be "on completion of property". The commencement could have been when "the lessor has completed all necessary works and handed over the keys to our client" (letter of 29 May 2002), or when the lease is executed following provision of a s149D certificate (letter of 6 September 2002), or some other date subsequently agreed between the parties. If an intention then and there to enter into a binding agreement had been manifested, the court could have construed the correspondence and determined a date or event; but the absence of a clearly identified date or event militates strongly against a finding of an intention then and there to enter into a binding agreement.
47 That view is confirmed by the raising and non-pursuit of the question of an agreement for lease (letter of 29 May 2002), the clear contemplation of entry into a formal lease, the size and length of the proposed transaction, and the requirement of a s149D certificate before making the final commitment by signing a lease: cf Hali Retail Stores Pty Limited v Havaz [2007] NSWSC 412 at [15]-[28]. In my opinion, no binding agreement came into existence on or about 24 September 2002.
48 I would add that I would infer that the terms of the Ruse lease required a guarantee by Mr Magar; and that also points against a commitment by the respondent, in the absence of a commitment from Mr Magar. This was not relied on; and I mention it only as confirming a view I have arrived at independently.
49 Subsequent communications can be relevant to the question whether a contract has been formed: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1998) 18 NSWLR 540 at 547-9. In the present case, the later negotiations about the option and the inclusion of additional land could possibly tend to suggest that no contract had been entered into on or about 24 September 2002, if only by suggesting an otherwise unproved matrix of underlying negotiations between the appellant and the respondent at the time of the correspondence, against which the correspondence was to be construed; thus possibly tending against construction of the correspondence as manifesting an intention to be bound then and there. However, again, this is at most something that might confirm a view I have arrived at independently.
50 The letters concluding with the letter of 24 September 2002 did display a consensus as to all the essential terms of a lease, apart from the commencement date. The giving and taking of possession on 4 March 2003 manifested an intention to enter into binding legal relations of some kind; and the question is whether this was an intention to enter into binding legal relations on the terms as to which there had been consensus as at 24 September 2002, or on some other terms for a long-term lease; or merely on terms that they be landlord and tenant on a short-term basis (consistent with s 127 of the Conveyancing Act 1919) pending finalisation of the long-term lease.
51 By 4 March 2003, it appears that the appellant had spent large sums of money on signage, petrol bowsers and a fit-out; but that money was spent without there being in place any lease or agreement for lease, but rather in the confident expectation that there would be a lease in due course.
52 Also by 4 March 2003 there had been further negotiations concerning the option and the adjoining vacant land; and thus a question arises, in relation to any possible intention to be bound by the terms of a long-term lease, whether this was on the terms as to which there had been consensus as at 24 September 2002, or as to those terms apart from that concerning the option. Consideration of whether an intention was manifested to be bound by the terms of a long-term lease is also affected by the circumstance that the appellant's prior expenditure showed confidence that agreement would in due course be reached. The granting of a "rent holiday" for the first month, consistently with clause 5.2A of the draft lease, is also consistent with a confident expectation on both sides that agreement would in due course be reached.
53 In all these circumstances, I would not be satisfied that the giving and taking of possession on 4 March 2003 manifested an intention to be bound by the terms as to which there had been consensus as at 24 September 2002, or by those terms minus the term as to the option. The circumstance that the appellant could waive its rights under the option (and that the time for exercising the option has in any event passed), and also could waive and does not seek entitlement to the adjoining vacant land, does not remove the effect of continuing negotiations as to these terms on the question whether an intention was manifested to be bound then and there by an agreement for a long-term lease.
54 For those reasons, I would uphold the primary judge's decision that there was no agreement for a long-term lease, and on that basis dismiss the appeal.