City Convenience Stores Pty Ltd v Third Lafite Pty Ltd; Third Lafite Pty Ltd v City Convenience Stores Pty Ltd

The factual background

1. In order to consider the reasons for Decision of the Principal Member, and the competing submissions of the parties it is appropriate that we refer to the factual background to the proceedings as established by such evidentiary material as was adduced in the proceedings at first instance. That material consists of communications between the parties, or on their behalf, mostly in email form, certain documentation either entered into or presented to the parties, and statements by persons who are the principal minds of each of the corporate parties.

The 18 July 2013 Proposal

1. There is no doubt that the Owner as licensor and CCS as licensee entered into a document expressed to be a casual license agreement for premises being the ground floor, 300 George Street Sydney (the Proposal). The Proposal was expressed to commence on 3 June and expire on 4 September 2013 unless terminated earlier. It provided for payment of an occupation fee calculated at the rate of $5500 per week plus GST.
2. On 18 July 2013 agents acting for the Owner submitted a tenancy proposal to CCS which they believed "the lessor would be willing to proceed on." The proposed leased premises were part only of the premises then currently occupied, being 80 square metres. The proposed lease was for a period of five years at a rental of $286,364 per annum plus GST. The document itself was said to be "Subject to Lessor approval and lease." It stated that the lease documents would be in the current standard form used by the Lessor and that a "basic draft" was available for review but that it was "subject to change at the Lessor's discretion and may not accurately reflect the lease to be prepared for the Premises." Furthermore, the Lessee was required to sign all lease documents and pay all associated costs within 14 days of presentation of the documents or "otherwise in accordance with any instructions of the Lessor or the Lessor's solicitor specified in any covering letter accompanying the lease documents." The document also said that the Lessor may withdraw the offer in its discretion.
3. In dealing with the permitted use of the premises, the Proposal document said that CCS would provide exact usage of the leased premises prior to the lease being issued.
4. There was provision in the Proposal form requiring the Lessee to provide a Bank Guarantee equivalent to 6 months' gross rent. The Lessee was not to be given possession until the bank guarantee had been received. The form of the bank guarantee was required to comply with the Lessor's bank guarantee requirements which were to be given to the Lessee "separately."
5. There was also a provision that the Lessee may be denied access to the premises until all legal documents were signed and returned to the Lessor, or costs were paid, the bank guarantee and certificates of insurance were received and "Applicable authority permits are obtained."
6. The Proposal contemplated that a subdivision application would be lodged with the Council and that work would be undertaken to create a partition wall and shopfront.
7. The Proposal document was executed on behalf of CCS on 8 August 2013 and was said to be "subject to the terms and conditions outlined in this Tenancy Proposal". There was handwritten under the signature of Mr J Gebara, a Director of CCS a notation that execution was subject to a development consent. Furthermore, the handwritten notation said that the lessor was to provide draft plans for review "as per the executed heads of agreement on current licence arrangement."
8. On 4 September 2013 the agent forwarded a receipt to CCS for "holding deposits" of $26,250 and recommended that the Owner prepare lease documents.
9. It appears that the Owner submitted a development consent to the Council to subdivide the premises but the approval conditions were not acceptable to it. Accordingly, the proposed lease was never approved or signed by the Owner and never came into existence.
10. Dr Harold Chua is the sole director/secretary of the Owner. He made a statement on behalf of the Owner He said that at that stage "While I still wanted to obtain a long-term commitment for the Premises, I allowed CCS to, in effect, hold over on the expired Licence, and continue to have use of the whole of the Premises at less than market rent until I could obtain a long-term lease commitment for the Premises". The only statement made on behalf of CCS by its principal, Mr J Gebara, does not deal with anything which occurred at this point of time. There is evidence that CCS continued to pay an occupation fee at the same level for some time and it continued in possession of the same premises and to operate a convenience store.
11. Apart from the statement of intention and understanding made by Dr Chua, the brief facts which are available are indicative that by continued payment of the occupation fee CCS was content to remain in the same premises on the same basis as had been established under the licence agreement. In the same way, by taking no action to evict CCS, and by continuing to accept the payment of the occupation fee at the same level, and having regard to the statement of Dr Chua, it is clear that the Owner was content for the status quo to remain. In our opinion this is material from which it may be inferred that there was agreement between the Owner and CCS for the continued occupation of the premises upon payment of the same occupation fee.

The Notice of Termination

1. On 2 May 2014 the Owner's agent gave CCS 20 days' notice to terminate the license agreement. It was said by Dr Chua that this notice was given to avoid a retail lease coming into operation pursuant to the provisions of section 6A of the Act. It was intended to avoid CCS being said to be in possession of a retail shop without interruption for more than one year. The notice of termination said that notwithstanding 20 days' notice to terminate being given by the letter dated 2 May 2014, CCS was required to provide vacant possession "no later than midnight 30 May 2014, unless we enter into a long term agreement prior."
2. Notwithstanding the giving of this notice CCS remained in possession of the premises after 30 May 2014 and continued to trade there. However, save for one small payment of $3500 CCS did not pay any further occupation fees.
3. In his statement Dr Chua said: "Savills (the Owner's agents) entered into discussions with CCS about a long-term lease commitment at the Premises during May 2014. My view was that CCS had only been given a short term agreement under the Licence (at a less than market rent), and if they wanted to stay in the Premises they could now either commit to a long-term lease at a market rent, or else they could vacate the Premises. CCS did not vacate the Premises by the end of May 2014, and discussions about the terms for a long-term lease of the Premises continued."
4. By letter dated 10 July 2014 the Owner's agent forwarded a tenancy proposal to CCS for premises described as being the area currently occupied, and, inconsistently, described as part of the premises currently being occupied. The area was said to be 93.30 m² including the mezzanine level. This area is a reference to the totality of the premises occupied by CCS from the inception of the initial license. The lease was proposed to commence from 1 July 2014 with a base rent of $440,000 per annum plus GST payable monthly in advance. There was an incentive of nine months' rent free amortised over the initial lease term of 5 years commencing from 1 July 2014. There was provision for a bank guarantee from CCS with possession not to be given until that was provided. Importantly, clause 29 said that if the Lessee failed to sign the lease documents within 14 days of receipt, failed to pay costs and to satisfy other terms or conditions of the proposal the Lessor was entitled "in its discretion" to elect to terminate the tenancy proposal and/or keep the deposit. Furthermore, the Tenancy Proposal was said to be subject to the final approval of the Lessor within its absolute discretion. The lessee was said to acknowledge that the Lessor was not bound by the Tenancy Proposal until all lease documents satisfactory to the Lessor were signed by all parties, and the bank guarantee had been provided.
5. The documentation contained a notation "Execution by the Lessee." This read; "I/We on behalf of the Lessee hereby offer to lease Lot 2 and 4, 300 George Street, Sydney subject to the terms and conditions outlined in this Tenancy Proposal." It was signed by Mr Gebara as a Director on behalf of CCS and dated 29 July 2014.
6. By email dated 29 September 2014 solicitors acting for the Owner forwarded to solicitors acting for CCS a number of documents including heads of agreement dated 10 July 2014, disclosure statement, draft lease and draft incentive deed saying that on their instructions "the landlord and the tenant have agreed to revised terms of the lease." It was said that the lease was in substantially the same form as the previous lease "subject to changes for the commercial terms." Indeed, the form of lease contained marked-up terms which were said to represent agreement reached between the parties concerning amendments to the original form of lease submitted in connection with the July 2013 Proposal. Importantly, the July 2014 proposal related to the whole of the ground floor premises plus mezzanine of 93.30 square metres.
7. The form of lease in marked up terms was not signed by both parties.
8. Thereafter CCS remained in possession of the premises, but did not pay any occupation fee except for one small lump sum. On 14 October 2014 the Owner forwarded an email to a person or persons on behalf of CCS referring to an invoice which appears to be dated 15 September 2014 showing arrears of payments calculated at the rate of $11,000 per fortnight for the period 23 September 2013 to 16 June 2014, and with the exception of an item entitled "1 day starting" on 30 June 2014, thereafter monthly payments of $31,188.67 from the period 1 July to 1 September 2014. All those amounts were exclusive of payments claimed in addition for GST. The total amount said to be due and owing was $128,004.29 allowing for payments during the period of $314,510. Importantly, the subject of the email is described as "Rent Invoice Unit 2 and 4 300 George Street Sydney."
9. By email dated 30 October 2014 solicitors acting for the Owner asked solicitors for CCS when they could be expected to provide comments on the draft documents previously forwarded.
10. By tax invoice dated 5 December 2014 addressed to CCS the Owner sought the payment of $102,850 inclusive of GST being for the payment of 3 months "rent" commencing 1 October 2014. An email from the Owner to CCS of 6 December said that "your rent is now in arrears by $230854.29 (inclusive of Dec 2014)" and "formally" requested payment. On 8 December CCS responded stating that attached invoices were incorrect, and asking that they be corrected to show "$12100 fortnightly inclusive of GST from 1 July 2014 so we can attend to payment or (sic) arrears …to bring rent to date." This evoked a reply later that day stating that the invoices were "correct. The new rent from 1 July 2014 was agreed and has been signed off."
11. By email dated 9 December 2014 on behalf of CCS and forwarded to the Owner, it was said that "The agreement was subject to the lease, bank guarantee and a number of other conditions that has not been satisfied. If we have any obligation to pay rent, it has to be at the rate of $12,100 per fortnight inclusive of GST. Please amend the invoice and forward through."
12. On 22 December 2014 an email on behalf of CCS forwarded to the Owner reiterated that the "correct fortnightly rent" was $11,000 plus GST. The email went on to say "We are no longer in a position to long-term lease the premises at the monthly rental of $31,166.67 plus GST because our business formula is not viable at this rent. There has been significant adverse change in our circumstances and therefore we will not sign the lease document." It then repeated that the increased monthly rent was incorrect and "was subject to execution of a lease document by both parties and the provision of a bank guarantee. Consistent with this position we note that you have been advertising the premises for lease in a number of websites and is (sic) actively looking for a new tenant." This email elicited a response asking CCS to vacate the premises "immediately" and no doubt was the trigger for the repossession of the premises by the owner.
13. On 4 February 2015 the Owner forcibly took possession of the premises on the basis of non-payment of rent. At the time that the Owner entered the premises and took possession there was handed over to a person who a representative of the Owner took to be an employee of CCS a letter from Thomson Geer, solicitors acting for the Owner addressed to CCS which contained, inter alia, the following terms; "We are instructed that City Convenience Store Pty Ltd….. are in breach of Your obligation to pay rent. We are instructed that You have been in arrears of rent since May 2014, and that as of the date of this letter, the arrears owed by You is in excess of $260,000….. In accordance with the Landlord's rights, the Landlord has elected to terminate the tenancy by re-entry due to Your non-payment of rent, effective from the date of re-entry. The Landlord also reserves its rights to commence proceedings against You for recovery of the Arrears without further notice, and without taking any further steps against You….. The Landlord otherwise reserves all its rights."

The 3 June 2013 license agreement

1. There can be no doubt that a license to occupy the premises operated from this date and we so find. Furthermore, from this date and until 4 February 2015 when the Owner forcibly repossessed the premises CCS continually remained in possession of the same premises without interruption, and continued to trade from them.

The July 2013 lease proposal

1. Before the Principal Member and before us CCS argued that the July 2013 lease proposal had "contractual significance." This was firmly, and in our opinion, correctly rejected by the Principal Member because of the number of conditions which attended the proposal, which we have previously described which were not fulfilled. Accordingly no agreement was formed by means of this Proposal and the factual circumstances which then prevailed.. Significantly also was the fact that the 2013 lease proposal related to a smaller area following the proposed subdivision of the premises to which the Owner ultimately did not agree.
2. It was submitted on behalf of CCS that the circumstances pertaining to the July 2013 lease proposal were such that they created a statutory lease by reason of the provisions of section 8 of the Act. In order to deal with these provisions is first necessary to refer to the definition of a retail shop lease or lease as contained within section 3 of the Act.
3. Section 3 is in the following terms; "retail shop lease" or "lease" means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop: (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing.
4. It will be seen that the gravamen of the provisions of section 3 is directed to the grant or agreement to grant a right of occupation of premises for use as a retail shop. The agreement may be express or implied, made orally or in writing or partly in both forms. It was not suggested on behalf of CCS that there was in fact a grant of a right of occupation by reference to the proposal documentation, but it was submitted that there was an agreement to grant a right of occupation of the premises. It was said that the agreement would operate from 4 September 2013 being the date that the earlier license expired. In support of this submission CCS relied upon firstly the provisions of the leasing proposal, secondly the fact that it was signed on behalf of CCS on 8 August 2013, thirdly that a one month rent deposit of $26,250 was paid and fourthly that the agent for the Owner stated that it would recommend that the Owner now prepare lease documentation. One further element relied upon by CCS was the asserted failure by the Owner to refund the rent deposit paid.
5. Furthermore, CCS relied upon the fact that the Owner continued to accept rent in the same amount which was the amount payable under the July 2013 Proposal document, that the Owner's solicitor forwarded CCS a Lessor Disclosure Statement and lease document on 17 October 2013 pursuant to the provisions of the Proposal documentation and that subsequently the Owner applied for subdivision approval for the premises.
6. These were the matters upon which CCS relied in pointing to a sufficient consensus to constitute an agreement pursuant to which CCS would occupy the retail premises.
7. We have previously indicated that we reject the submission that in some way there was established by the July 2013 Proposal and its acceptance by CCS of an agreement pursuant to which CCS continued to occupy the premises. Apart from the problematical nature of the agreement constituted by the various preconditions to which we have referred in some detail, significantly the July 2013 Proposal was directed only to a part of the premises which were then occupied by CCS. At no stage did CCS ever occupy the smaller premises contemplated by the July 2013 Proposal. There is nothing in the documentation that would indicate that any degree of agreement was ever reached by reference to the July 2013 Proposal documentation that would create an entitlement in CCS to occupy the premises which it had hitherto occupied. Nor did either party conduct itself in any manner consistent with such agreement having been reached. Indeed, apart from CCS continuing to occupy the larger area of premises, the parties embarked upon discussions about the continued occupation of the existing premises, Such conduct is clearly inconsistent with any measure of agreement having been reached for occupation of the smaller area.
8. In the course of its submissions CCS relied significantly on the provisions of section 8 of the Act in determining when the asserted retail lease constituted by the July 2013 proposal came into effect. Once it has been decided, as we have, that no relevant retail shop lease was then created by reason of the provisions of the section 3 definition, it becomes unnecessary to consider the provisions of section 8 of the Act.

The 2 May termination notice

1. The Principal Member held that the notice was effective to terminate the license agreement on 30 May 2014, and that thereafter until CCS was evicted on 4 February 2015 it remained in the premises as a trespasser without any legal right to do so.
2. It is a trite observation that a contract may be terminated by a party having the right to do so either expressly or by implication under the terms and conditions of the contract. It seems patently obvious that the notice of termination was validly given and that its effect was that unless a long-term lease had been entered into the licence to occupy the premises would come to an end on either the expiry of the 20 days' notice, or perhaps 30 May by way of indulgence. In the circumstances, it is not necessary for us to consider the precise date upon which the notice had effect. The Principal Member accepted that the notice was effective to terminate the right to occupy the premises, and neither party submitted to the contrary.
3. There is, however another way of considering the effect of the notice. That is, it was never intended to bring about a termination of the license to occupy, and was given only to achieve an outcome that would avoid sec 6A applying. Sec 6A is in the following terms; 6A Application of Act to short-term leases (1) Generally, Act not to apply to short-term leases Subject to subsection (2), this Act does not apply to a lease of a retail shop for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise). (2) Exception for successive, extended or renewed leases for more than one year If the lessee has been in possession or entitled to be in possession of the retail shop without interruption for more than one year (whether by means of a series of 2 or more leases or by means of an extended or renewed lease or leases, or by any combination of those means), this Act applies to: (a) the lease on and from the day on which the lessee has been in possession or entitled to be in possession of the shop for more than one year, and (b) any succeeding lease or leases of the shop to the lessee, where possession or entitlement to possession is not interrupted. (3) Operation of provisions for disclosure statements Section 11 does not apply to the lease referred to in subsection (2) (a), but applies to any succeeding lease referred to in subsection (2) (b). (4) Operation of provisions for minimum 5 year term Section 16 (1) and (2) do not apply to the lease referred to in subsection (2) (a) unless the lessee notifies the lessor in writing during the term of the lease that the lessee elects to have the benefit of section 16. However, in that case, any period for which the lessee has already been in possession or entitled to possession of the retail shop without interruption is taken to be included in the term of the lease. (5) Operation of other provisions The regulations may provide that, if this Act applies to a lease because of subsection (2), specified provisions of this Act (other than sections 11 and 16 (1) and (2) and Part 2A) do not apply to or in respect of the lease or apply with prescribed modifications. (6) Certain interruptions do not break continuity The regulations may provide that interruptions for a prescribed period or of a prescribed kind are to be disregarded for the
4. We have previously referred to the statement of Dr Chua that this notice was given to avoid a retail lease coming into operation pursuant to the provisions of section 6A of the Act. It was intended to avoid CCS being said to be in possession of a retail shop without interruption for more than one year under subsec (2).
5. In our view it does not matter which view is adopted of the effect of the notice, because the controversy between the parties revolved around the circumstances pertaining to the continued occupation of the premises by CCS, which we shall now discuss.

The continued occupation of the premises by CCS

1. Notwithstanding the expiry of the termination notice CCS continued to occupy the premises, but with the exception of one small payment of $3500 in December 2014 it did not henceforth pay any occupation fees. In these circumstances it is necessary to determine whether and to what extent there was any relationship between the Owner and CCS concerning this continuing occupation. CCS submitted, as found by the Principal Member that it was a trespasser but challenged the finding that the Owner was entitled to an award of compensation calculated under the principles applying to mesne profits. The Owner submitted primarily that the July 2014 lease proposal constituted an agreement for the occupation of the premises as defined in section 3 of the Act, that CCS was bound by it, and that it was entitled to recover compensation by reference to the higher rental contained within its terms. Relevantly to our consideration of this issue, the Owner submitted in the alternative that CCS continued to occupy the premises after the expiry of the termination notice pursuant to the provisions of an agreement which constituted a retail lease under section 3 of the Act. As these circumstances predate the July 2014 lease proposal, and, as will be seen, we reject the primary submission of the Owner, we shall proceed to consider this alternative submission.
2. It is clear that both the owner and CCS contemplated that CCS would remain in possession of the premises whilst the further negotiations were proceeding after the notice of termination of 2 May 2014 which had been expressed to be in "formal" terms had been given. It is also clear from the tax invoice dated 15 September 2014 issued by the owner that at least until 30 June 2014 the owner anticipated that it would be receiving "rent" at the rate of $11,000 per fortnight plus GST. Furthermore, the emails from CCS to the Owner of 9 and 22 December are a clear indication that it contemplated that it would have to continue to pay the same occupation fee for its continued occupation of the premises.
3. In his reasons for decision, the Principal Member noted that the Tenancy Proposal contained terms denying the existence of any contract until it had been finally approved by the lessor and until documents satisfactory to the lessor had been signed and monies had been paid. As none of these events occurred, and as there had been no consideration moving from the Owner to CCS, the absence of mutuality led the Principal Member to find that there was no relevant agreement for lease which could form the basis of a retail lease under section 8 of the Act created by the events surrounding the July 2014 proposal. We agree with this conclusion and the reasons of the Principal Member.
4. In its submissions on appeal the Owner asserted that sufficient consensus to constitute an agreement for lease was established by the submission of the July 2014 Lease Proposal signed on behalf of CCS and the provision of the July 2014 Lease documentation by solicitors for the Owner in September 2014. The former was said to be characterised as an offer and the provision of the lease documentation as acceptance of that offer. Furthermore, the fact that CCS continue to occupy the premises after issue of the documentation in September 2014 itself constituted consent to the new lease arrangements.
5. On this basis the Owner submitted that all of the terms which were the subject of agreement between the parties created not only a binding agreement at law but also a binding retail lease under section 8 of the Act.
6. Section 8 is in the following terms; 8 When the lease is entered into (1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first). (2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease. Note : Therefore, if the lessee starts to pay rent as lessee or enters into possession as lessee, the lease is considered to have been entered into even if neither party has executed the lease at that time. Money paid in advance (purportedly as rent) as a deposit to secure premises for a proposed lease does not constitute rent paid as lessee under the lease.
7. Section 8 only applies where a lease has been executed or possession has been entered into "under the lease" which at that stage may not have been executed. Nevertheless, because of the definition of a retail shop lease in section 3, previously referred to, it is still necessary to establish some form of consensus between the parties concerning the occupation of the retail premises, albeit that no formal lease documentation has been entered into. This analysis is consistent with the Decision of the Administrative Decisions Tribunal of NSW in Helou v Bong Bong Pty Ltd [2006] NSWADT 128. At [82] the Tribunal said; 82 In the Tribunal's opinion, the foregoing cases establish the following propositions regarding s 8(1). First, a person who is already in possession of retail shop premises pursuant to a pre-existing tenancy not covered by the Act may be said notionally to 'enter into possession... as lessee under the lease' without vacating and re-entering the premises, once an agreement for a new lease falling within the Act is concluded. Secondly, the commencement of a lease by virtue of entry into possession or payment of rent by the lessee may occur under s 8(1) even though no formal deed or agreement of lease is ever executed, so long as the parties have reached 'consensus' as to the terms of the lease. Thirdly, in order to reach this 'consensus', so as to give rise to the requisite 'lease relationship', it is not necessary that the parties reach agreement on all the terms of the right of occupation. This is an implicit consequence of the broad definition of 'lease' in s 3, embracing 'any agreement', express or implied, and whether oral, in writing, or partly oral or partly in writing, 'under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purposes of the use of the premises as a retail shop'.
8. For reasons which we shall shortly state we are of the opinion that at all relevant times CCS occupied the subject premises under a retail shop lease as defined in section 3 of the Act, but the consensus upon which that lease operated was not established by the July 2014 Lease Proposal and its sequelae. The same contra indicia as applied to the July 2013 Lease Proposal in holding that this did not constitute an agreement which could form the basis of a retail shop lease apply to the circumstances of the July 2014 Lease Proposal, save that the area to be occupied was consistent with that always occupied by CCS. In particular, there was never any indication that the Owner had given its "final approval" to the documentation and that documents satisfactory to the Owner had been signed, monies paid, bank guarantee given and the other conditions satisfied. In addition, neither party seems to have been in a great hurry to finalise any degree of consensus concerning the occupation of the premises constituted by the July 2014 Lease Proposal. It seems that the negotiations commenced sometime in May 2014, the Lease Proposal document was not presented to CCS and executed by CCS until 29 August 2014, lease documents and other documentation were not presented to CCS by the Owner's solicitors until 29 September 2014, an enquiry by the solicitors for the Owner as to the reaction of CCS to the documentation was not made until 30 October 2014, and no formal demand for payment of outstanding rent was made by the Owner until 14 October 2014 and then not followed up until December 2014. This leisurely pace is not indicative of any consensus having been reached between the parties flowing from the July 2014 Lease Proposal.

Was there otherwise consensus to create a retail shop lease?

1. At all relevant times the initial license agreement constituted a retail shop lease for the purpose of the Act provided, however, it continued in effect for a period of more than one year or there was continuous possession by means of a series of retail shop leases as defined for a period in the aggregate of more than one year. So much is clear from the provisions of section 6A(2) of the Act which we have set out above.
2. It is clear that both the owner and CCS contemplated that CCS would remain in possession of the premises whilst the further negotiations were proceeding in July 2013 and after the notice of termination of 2 May 2014 which had been expressed to be in "formal" terms had been given and had expired.
3. Accordingly, if the notice of termination was effective to terminate the licence to occupy, then there sprang up immediately thereafter a further retail shop lease constituted by the consensus which we have previously identified, namely that the Owner was content to allow CCS to continue in occupation of the same premises whilst the negotiations continued. If the notice of termination was not effective, there would ipso facto be a continuation of the existing license agreement. Either scenario would constitute uninterrupted possession of the retail shop for more than one year by means of either the one extended retail shop lease or a series of two or more leases as contemplated by section 6A(2). Because we have concluded that no relevant consensus was created either by the July 2013 Lease Proposal or the July 2014 Lease Proposal, it may be inferred that the status quo, including the consensus, continued in effect. It is clear from the tax invoice dated 15 September 2014 issued by the Owner that at least until 30 June 2014 the owner anticipated that CCS would continue to occupy the premises and that it would be receiving "rent" at the rate of $11,000 per fortnight plus GST. Furthermore, the emails from CCS to the Owner of 9 and 22 December are a clear indication that because it continued to trade from the premises it contemplated that it would have to continue to pay the same occupation fee for its continued occupation of the premises. We regard the tax invoice of 15 September 2014 and these emails from CCS as constituting evidence of a consensus concerning the continued and uninterrupted occupation of the same premises by CCS throughout all this period. And finally the letter from the Owner handed to the CCS representative when it took possession on 4 February 2015 confirms its understanding that there was a lease in operation at that time.
4. Counsel for CCS sought to argue that it would be impermissible for us to rely on the tax invoice and emails referred to above as constituting evidence from which we might infer that there was relevant consensus between the parties sufficient to constitute a retail shop lease. In this regard reliance was placed on the well-known decision in the High Court of Australia in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 as exemplifying what was called the "principle of objectivity" to be applied in ascertaining the provisions of a contract. The factual situation with which the High Court was dealing in those proceedings was significantly different from that which applies to these proceedings. In Toll, the parties had executed a written form of contract which had been signed by a person on behalf of one of the parties without reading its provisions. No such documentation exists in the circumstances of these proceedings. The discussion in the High Court centred around whether or not a ground of unilateral mistake might detract from the consensus otherwise reached by the parties within the terms of the written contract. There is no such consideration before us. However, we take comfort in the approach which we have determined to take from the following extract from the judgement of the Court in Toll at [40]; This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. (citations omitted)
5. In considering the documentation to which we have referred we have approached the matter by reference to what the words and conduct of each of the parties "would have led a reasonable person in the position of the other party to believe."
6. Thereafter, the question arises whether the issue of tax invoices for a rental of $31,186.67 per month plus GST and the refusal of CCS to pay this higher amount indicated that there was no agreement concerning the occupation fee payable. It is arguable that up until 30 June 2014 the amount of the occupation fee was agreed, as previously set out. At that stage we would regard the demand by the Owner for payment of a higher amount of "rent" as constituting a request for a variation of the ongoing agreement which was for an indefinite term terminable upon notice. This variation was never accepted by CCS. In circumstances where the owner continued to permit CCS to remain in possession notwithstanding non-payment of occupation fees at the higher level, or indeed consistently with its obligations under the prevailing level, the proposed variation was never the subject of agreement. Accordingly, the agreement continued in operation on its existing terms including the level of the occupation fee of $11000 per fortnight plus GST until terminated by the owner when it repossessed the premises.

The fate of the appeals

1. At the heart of the proceedings was a claim by the Owner for the payment of outstanding occupation fees. The Principal Member having held that the notice of termination was effective and that CCS remained in the premises as a trespasser awarded the payment of compensation to the Owner calculated on the basis of mesne profits which he assessed in terms of the increased occupation fees contained in the July 2014 Lease Proposal. We have come to a different conclusion concerning the effect of the notice of termination and the sequelae by reference to our examination of such factual material as is available. We disagree that the notice of termination was sufficient to destroy the prevailing consensus. If it did come to an end it was immediately replaced by a further consensus which we have described. On either basis there was a continuity of consensus for possession which in all the circumstances constituted a retail lease under the combined provisions of sec 3 and 6A(2) of the Act. Accordingly, the Principal Member was in error as to the effect of the notice of termination on the consensus or consensi concerning the underlying right of CCS to occupy the premises. Such an error is an error of law, and mandates that such part of the Decision under appeal must be reconsidered.
2. It follows from our identification of the error of law identified above that the appeal of the Owner must succeed in part

Consequential orders

1. On our analysis, CCS continued in occupation of the premises without interruption pursuant to the original terms of the original licence agreement as extended or renewed from time to time. Accordingly, section 6A applies giving the Tribunal jurisdiction and power to deal with the matter. We are satisfied that the claim for outstanding monies brought by the owner against CCS should be confined to the arrears in payment of the occupation fees set by the original licence agreement, which we have found never to have been varied, and not a payment calculated by reference to mesne profits. On this basis, the appeal by CCS should be allowed, and the finding of the Principal Member varied, to the extent only that a lesser sum should be awarded by way of the license fee outstanding, and such part of the cross-appeal brought by the Owner which is inconsistent with such a finding should be disallowed.
2. We asked the parties to confer and provide us with an agreed sum which reflected the amount owing by CCS to the Owner under the terms of the license agreement. We have not been informed whether the parties have conferred and whether they have been able to reach agreement on the calculations. Unless the amount is agreed, this may arguably result in a further hearing and further costs being incurred. In the circumstances we are forced to reserve the making of a monetary order reflecting the amount of monies which should properly become payable by CCS to the Owner, and we are compelled to grant liberty to apply with respect to final orders.
3. For completeness, we note that the conclusion to which we have come as to the determination of these proceedings means that we do not need to deal with arguments raised by CCS that compensation should have been assessed according to the principles of quantum valebat, but that in any event CCS could not be the subject of any order for the payment of any compensation for arrears of occupation fees. In the same way we do not need to consider an application made by the Owner that the matter be referred to the Supreme Court under section 76A of the Act because no unconscionable conduct claim has been raised before us.

Costs

1. The question of costs was not argued before us. We shall reserve costs with liberty to apply.

ORDERS 1. Appeal by CCS allowed in part 2. Orders made on 28 January 2016 for the payment of monies set aside 3. The parties are directed within 7 days to file minutes of short orders reflecting the agreed amount of moneys payable by CCS to the Owner pursuant to these reasons, so that our Orders may be finalised. In default the proceedings will be listed for further hearing for the purpose of determining the amount of money to be ordered to be paid, and to enable the Appeal Panel to receive an explanation why agreement was not reached. 4. Costs are reserved with liberty to apply which must be exercised within one month of this date I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 29 November 2016