Comdox v Robins [2009] NSWSC 367 | Case summary

2085/2009 COMDOX NO. 24 PTY LTD v ROBINS & ORS JUDGMENT 1 HIS HONOUR: These proceedings relate to the lessee's claim that it has exercised an option to renew lease AD 146130T of a Mexican restaurant in Oxford Street Bondi Junction. The lessee is Comdox, the plaintiff. The lessor which granted the lease was the Sydney Society of the New Church, the third defendant. I refer to it as the New Church. The lease term commenced on 17 April 2006 and expired on 16 April 2009. The lease was granted on exercise of an option of renewal in an earlier lease and itself contains one option to renew for another three years. The period available for exercise of the option ran from 16 October 2008 to 16 January 2009. 2 The New Church entered into a written contract on 16 July 2008 to sell the freehold, subject to existing tenancies, to Freson & Co Pty Ltd. The contract was varied, Messrs Robins the first and second defendants became the purchasers, they completed the purchase on 5 December 2008 and were registered as proprietors on 9 December 2008. So they are now the lessors. The Register Folio contains a notification of the lease, which refers specifically to the existence of the option to renew for three years. 3 Comdox commenced these proceedings by Summons on 26 March 2009 claiming specific performance of an obligation of the Robins to grant Comdox a new lease on exercise of the option, and a declaration that the option to renew had been validly exercised. Comdox filed its Statement of Claim on 20 April 2009, and the Robins filed their Defence, taking issue with many parts of the claim, particularly with the due exercise of the option. The New Church was joined as the defendant on 30 April 2009 the day of the hearing, and filed a Defence which, while it does not admit the whole of Comdox' claim, is in substance a submission to the court's decision. 4 In the lease the option to renew is dealt with in cl 9: 9. OPTION TO RENEW 9.1 If the Lessee desires to take a renewed lease of the Demised Premises and the lessor shall grant a new lease under this clause 9 for a further term and in accordance with the particulars as set out in Item 4 of the Reference Schedule if: (a) the Lessee gives the Lessor a notice in writing stating that it desires a renewed lease of the Demised Premises of the terms set out in Item 4 of the Reference Schedule; and

Vaughan Zarb and Co is the firm name under which Mr C J Zarb carries on legal practice as sole practitioner. 14 Vaughan Zarb and Co wrote to Peter Murphy & Co Solicitors of Bondi Junction, who acted for the Robins as purchasers, on 30 October 2008, referred to the sale and of the address of the property and after dealing with matter relating to the sale went on to say: We enclose herewith a Notice of Exercise of Option by the Lessee at 306 Oxford Street, Bondi Junction. The Lease is due to expire on 16th April 2009. The option for renewal is exercisable between 17th October 2008 and 16th January 2009. The Lessee is not in breach of the Lease. Accordingly, the option to renew has been properly exercised. Please take instructions from your client as to a response to the solicitors for the Lessee. 15 Lang Noonan legal wrote again to Vaughan Zarb on 19 November 2008 again asking for acknowledgement of receipt of the notice and also asking "Can you also advise whether the lessor is prepared to nominate the commencing rent for the new term". Vaughan Zarb replied to Lang Noonan legal on 20 November, referring to the same matter and saying: We refer to the above matter and write to confirm receipt of the Notice of Exercise of Option received by us on 29th October 2008. We notified the solicitors for the purchaser. As settlement of this sale is to take place in early December 2008 we believe it would be proper for negotiations on the rental for period commencing 17th April 2009 be conducted with their client. 16 The Notice of Exercise of Option fulfils the requirements for notices in both cl 9.1(a) and cl 9.1(b) of the lease. The notice does not exactly use words stating that Comdox desires a renewed lease of the premises, but what it states unmistakably expresses a desire for a renewed lease, and fulfils para (a). The reference to the lease term makes this altogether clear. Turning to para (b), the requirement for notice of exercise of option is fulfilled, so far as language can do so, as directly as it well could be. 17 It is curious that cl 9.1 makes two different requirements for notices, and uses different language in doing so. The notice mentioned in cl (a) is a statement that the lessee desires a renewed lease. A requirement for a statement that the lessee desires a renewed lease could be fulfilled by something less than a complete commitment, although it would equally be fulfilled by a complete commitment to take a new lease, which would certainly state a desire to do so. There is no explicit requirement for the time during which the notice in (a) is to be given, although it must necessarily be given while the lease is itself current. I do not clearly understand why cl (a) is there, but it does provide machinery for the lessor to have notice in writing of what the lessee desires. Subclause (a) operates, in a way, to protect the lessee against becoming committed to take a new term by an expression of desire to take a renewed term; a more formal expression of commitment is also required. The notice referred to in cl (b) is altogether explicit and could only be fulfilled by the lessee taking an entirely unqualified position. The period of time during which the notice in cl (b) must be given is specified; it is a period of three months, not a short period; it provides the lessor with a later and final three months before expiry during which the lessor can make whatever disposition of its affairs the exercise of the option requires; and it also gives the lessor, if no notice of exercise is given, the certitude that during the final three months the lessor will clearly know that there is to be no renewal. 18 A noticeable difference in the terminology in cll (a) and (b) is in the language relating to the giving of notice. Under cl (a) the lessee gives the lessor a notice in writing and and under cl (b) the lessee serves on the lessor a notice of exercise of option. This difference in terminology evokes and perhaps requires consideration whether the different expressions reflect different intentions about the manner in which the notices are to be given, and if so what the different means of giving the notice are to be, and whether the words used express an intention that using the appropriate means is necessary for effectual exercise or is important in some other way. There is perhaps a shade more emphasis in (a) on communicating information - giving notice - than in (b) which more clearly requires the delivery of a notice, by necessary implication, a notice in writing. I see no real significance in this shade of emphasis. An important consideration is that it is not possible to understand why the particular means by which notice in writing is to be given, or by which a notice of exercise is to be served should be of real importance for the operation of a provision of this kind. What is of real importance is that the lessor should receive the notices and know what the lessee wants and what the lessee commits itself to. How that is to be done is not a matter to which it is likely the parties ever attributed any particular importance. 19 Senior counsel for the lessor put forward a number of submissions which related to whether the measures taken by the lessee complied with the means of serving documents or sending messages referred to in clause 27.2. In my opinion there is nothing in the text of cll 9 and 27, or in the provisions of the lease as a whole, which indicates that cl 27.2 prescribes means of serving a document or giving a notice which must be complied with, to the exclusion of other means. There is no expression in any way of a concept that the effectiveness of giving a notice or serving a notice is conditional upon compliance with cl 27.2. Clause 27.2 relates to any document under or relating to the lease, and of course its operation is not limited to notices under cl 9.1. Many provisions of the lease require or contemplate the giving of notices or conveying of information. They do so with various terminology; the lessee's counsel pointed to cl 6.2 "inform", cl 9.3 "give", cl 6.2 "inform" of an intention, cl 9.3 "give" a notice, cl 9.4 "inform", referring to written information of the annual market rent, cl 11.1(a) "delivered", a copy of an insurance certificate, cl 11.1(d) "notify" the fact of cancellation of insurance policy, cl 17 "made", a request for a consent to assignment and cl 20.2 "give", a notice of termination. Overall, the lease does not prescribe standardised forms of communication, and it is plain from the varying expressions used that closely prescribing manners and forms for communications was not a concern of those who drafted the document. A very wide variety of expressions was used, in provisions as to which the concern of those drafting the document plainly was that there be an effective communication, not that the manner of communication be strictly prescribed. If strictness was required the language would be more disciplined and the drafting tighter. In my opinion cl 27.2 is facultative, and indicates procedures which if followed are effective, but in no way limits or qualifies the general meaning of expressions in cl 9.1. 20 This view of the document is assisted, indeed emphasised by the absence of any general provision fixing a place for delivery of notices to the lessor, or a person, by name or by office held, to whom notices were to be delivered. (The same is true of notices to the lessee). Clause 27.2(b) deals only with part of the subject, and Item 9 relates only to cl 27.2(b). 21 It would in my opinion be a complete departure from the manner in which the lease uses language to conclude that the references in cll 9.1(a) and (b) to means of giving notice are charged with significance and make important requirements about the means by which notices were to be given or served, or as expressing an intention that effective exercise should be conditional on the observance of some special process. The object of the provisions about notices is effective communication. If a notice was delivered in a manner authorised by cl 27.2 but was not an effective communication because no-one associated with the lessor ever actually knew of it, the lessee may be entitled to rely on cl 27.2 to give effect to something less than effectual communication. But in this case, where the document sent by post was returned by the Post Office and it was obvious within one or two days of posting that the lessor had not received it, the lessee would not be able to do so. However the lessee is not in my opinion in the position to having rely on cl 27.2 or on any artificial extension of the concept of communication. 22 The lessor's senior counsel contended that it was necessary that there be two separate notices, one under cl 9.1(a) and another under cl 9.1(b), and that it was not within the meaning of cl 9.1 possible for a single notice to be both a notice given under cl (a) and a notice served under cl (b). I do not think that anything in cl 9.1 requires that two different notices be given or that two different pieces of paper be transmitted. If the lessee is minded both to state a desire to take a renewed lease and actually to exercise the option at the same time and in the same piece of paper, the lessee can do so and comply with both requirements if language appropriate to convey both messages is used. It is no doubt quite open to the lessee to give two notices; a pre-commitment statement of desire with no particular time requirement, followed by an unqualified exercise of option within the time prescribed; but there is nothing either in the terms of the lease nor in any purpose which can be suggested which supports understanding the requirement as one in which two different notices are essential. 23 An option is said to be "a ticklish thing", and as much case law shows, if particular means for exercising an option are intended to be essential for effective exercise, compliance with the prescribed means is necessary if the stated contractual relationship is to result. It does not matter whether observing the prescribed means is objectively important: what matters is whether the words used show that they were intended to be essential. If the language used really means that it is a condition of effective exercise of option that the notice must be on blue paper and delivered by a man in a clown suit, pink paper or a woman in a pixy suit will not be effective. There must be compliance; there is no allowance for taking some other non-complying course, even if it appears to achieve the same result. I do not see any value in speaking of strict compliance or exact compliance; compliance is required, the fair meaning of the contractual requirement should be understood and given effect, and undue exactitude or the creation of difficulties which the language does not yield on a fair reading are not appropriate. It is inherently likely that requirements for compliance with provisions of the existing lease, for written notice of exercise of option and for exercise within defined periods are conditions compliance with which is essential. References to means of communication and matters of details are unlikely to be intended to be essential; but they are essential if it clearly appears that they are intended to be. The Court does not spell out conditions from slight or incidental references. 24 Counsel made a wide survey of case law in which related questions have been considered, or touched on. In my opinion the principle involved, if it can be dignified as a principle, is simple; if particular steps for exercise of the option are made conditions of due exercise, the steps must be followed if rights are to arise; if the steps are not followed the rights do not arise. Courts take a different approach to procedural prescriptions relating to dealings with rights which have already been created; but rights on exercise of options are not of that kind. 25 While I do not regard the subject as determinative of the litigation, or as important, I will state my view that if the lessee's case depended on showing service of the notice under the facultative provisions of cl 27.2, the lessee would not succeed. The reference in cl 27.2(a) to service in any manner provided in s 170 of the Conveyancing Act 1919 was not fulfilled because the document was sent by post to the address in Middle Harbour Road Lindfield mentioned in Item 9, but that was not the last known business address of the New Church. On 16 September 2006 Mr Graham St Quintin, the Treasurer of the New Church, informed the lessee by letter Exhibit 1: Please note that our contact details are changing. I am taking 12 months' leave of absence from the position of Treasurer and our Chairman, Mr Zarb, is taking on my finance/property responsibilities in my absence. Please clear my details from your records. Postal address for service of notices is as above. 4 Shirley Rd Roseville NSW 2069. Mr Zarb's contact details are as follows. Mr C. J. Zarb Vaughan Zarb & Co. 3/20 Nelson Street Fairfield NSW 2165 (and telephone fax and email references were given) 26 The Middle Harbour Road address was, at the time the lease was granted, the home address of Mr St Quintin. However he did not give that address in the letter Exhibit 1. 27 This letter constituted a notice under cl 27.2(b) varying the address in Item 9 to be 4 Shirley Rd Roseville; this address was given on the letterhead of Mr St Quintin's letter as the address of the New Church. Paragraph 27.2(b) was not followed as the letter and notice of exercise were not left at any address, nor sent by facsimile. The letter also gave contact details for Mr Zarb the Chairman of the New Church and said that Mr Zarb was taking on finance and property responsibilities in Mr St Quintin's absence. In my finding this letter made both Shirley Rd Roseville and Mr Zarb 's contact details the last known business address of the New Church; if the facts justify it, it is quite possible for there to be more than one last known business address. Of course a corporation does not have a residential address. The manner provided in s 170(1)(b) was not observed because the address in Middle Harbour Road was not a last known business address of the New Church. A further matter is that in my opinion reliance on s 170 is not available in circumstances such of these where the letter was returned in the post and it was known to the lessee, within the period available for exercise of the option, that the letter had not actually reached the New Church. 28 As I said in Wallville Pty Ltd v Liristis Holdings Pty Ltd [2001] NSWSC 894 at [34]: "It appears even more clearly in the present form of s 170 than it did earlier that the operation of the section in relation to the post is to authorise service by post and make service by post sufficient, but not to create any artificial presumption that notice was given or is to be deemed to have been given when it has not in fact been given. Where s 170 is expressly incorporated as it is in this sub-lease, service of notice by post is an authorised means of service, but service is not effective unless a written notice is actually given to the lessor, and unless that event happens within the time required by clause 15." These observations were obiter as Liristis' case did not turn on s 170; the finding was that the notice had not been posted at all. I supplement what I then said by referring to the Interpretation Act 1987 s 76(1)(b) which may interact with s 170. Under cl 9.1(a), as under cl 15 in Liristis' case, observing s 170 is means of giving a notice, and if the lessee actually knows that the means were ineffective, s 170 does not in my opinion assist the lessee. 29 However non-fulfilment of the means made available by cl 27.2 does not demonstrate non-compliance with the requirements for giving notice and serving notice in cl 9.1(a) and (b). 30 It is altogether clear that Lang Noonan legal's letter of 28 October addressed to Vaughan Zarb & Co. and the enclosed copy of the notice of the exercise of option actually reached Mr Zarb and came to his knowledge within a short time. Mr Zarb wrote to the solicitors for the Robins, then the purchasers in the uncompleted sale, on 30 October 2008, reported what had happened and said: "Accordingly, the option to renew has been properly exercised." He wrote in the name of and on the letterhead of Vaughan Zarb & Co, a firm of which he was the only member. Peter Murphy & Co. made no particular response which is in evidence. They did not so far as appears take the position nor did the Robins take the position that there had not been an effective exercise until 23 January 2009, after the time available for exercise had expired. For this the lessor and its solicitors were the subject of criticism in observations by the lessee's counsel. I think it is enough for me to say of those criticisms that I do not endorse them because the lessors and their solicitors were not under any duty to state their position, in particular not under a duty to state their position while there was still time available for a further exercise of the option. 31 Mr Zarb also, again in the name and on the letterhead of his firm, informed Lang Noonan legal on 20 November 2008 of the receipt of the notice of exercise - "We refer to the above matter and write to confirm receipt of the notice of exercise of option received by us on 29th October 2008. We notified the solicitor for the purchaser." Mr Zarb and the New Church have continued to state matters in these terms after expiry of the time for exercise of the option, and in their limited participation in this litigation. 32 Correspondence before action continued between solicitors then representing the lessors and Lang Noonan legal. On 18 March 2009, shortly before the proceedings were commenced, and as the expiry of the lease on 16 April 2009 approached, Peter Murphy & Co. explained the position thus: The lease in clause 9.1(a) provides that the option for a further term must be exercised by "the lessee gives the lessor a notice in writing stating that it desires a renewed lease of the demised premises". It is noted that no such notice was given to the lessor and the purported exercise of option was an exchange of letters by two solicitors. As the notice of exercise of an option was defective, out client requires your client to vacate the premises on 16th April 2009." 33 Peter Murphy & Co. stated the position again, more fully, on 20 March 2009. 34 It is clear that the letter of 28 October 2008 with the notice of exercise reached Mr Zarb the following day and was treated both by Mr Zarb and by the New Church as an effectual exercise of option. If delivery of the letter and notice of exercise to Mr Zarb is equated with giving notice to the New Church, and with serving the notice on the New Church, the requirements relating to notice in cl 9.1(a) and (b) have been fulfilled. Attention then is directed to Mr Zarb's position. 35 Mr Zarb's firm represented the New Church at, he says "all relevant times" which includes the time of granting the lease and all times up to the present. Mr Zarb is also Chairman of the Board of the Church, and has been for some years. Mr Zarb said, in evidence which was not challenged, although other evidence shows a qualification, that he as solicitor acting for the New Church has not notified Comdox of any change of address for service of notices, and that since the lease was first granted to Comdox in 1999, all correspondence relative to the lease has emanated from his office as solicitor of the lessor and has been addressed to the solicitor acting for Comdox. The qualification must be that Exhibit 1 shows that Mr St Quintin the Treasurer communicated in the terms of Exhibit 1, dealing with contact details and delivery of notices, on 16 September 2006. 36 Mr Zarb and his firm handled the correspondence about the previous option to renew when it was exercised in 2006. Mr Zarb was one of two persons who executed the lease in the name of the New Church, referring to s 127 of the Corporations Act 2001 as the source of their authority; when signing the lease Mr Zarb gave his office held as Committee Chairman; the other officer Mr Duckworth gave his office held as Church Minister/Director. 37 The New Church is a company limited by guarantee, with licence to omit "Limited" from its name, formed on 30 June 1887. Since 9 March 1992 its registered office and registered principal place of business have been 4 Shirley Rd Roseville NSW 2085. In October 2008 and continuing since then, the New Church had 10 directors, and Mr Zarb has been Chairman of the Board. 38 The New Church as a company is a legal person. Treating it as a person to whom any notice may be given or on whom a document may be served has an element of fiction. It is possible, observing statutory procedure, to give a notice or serve a notice by delivery to the registered office of a company, a measure which unfortunately was not taken in the present case. The element of fiction in identifying a company and its legal personality in some act in the law which primarily refers to involvement of a natural person is not an advantage for the company or a shelter against participation; the difficulty is no more than an apparent difficulty as practically always, as in this case, there are officers of the company acts of and acts involving whom are to be equated as a matter of law with acts of the company. Where a company has a secretary, as this company did, handing a notice in writing to the secretary fulfils the fiction and is equated with handing notice to the company. Mr Zarb is an officer of the company; one of nine directors, but the Chairman of Directors and the persons whose function it usually, although not invariably was to receive and originate correspondence for the company relating to dealings with the lessees and with the lease. In the functions of correspondence, receiving and communicating about the lease, Mr Zarb functioned as the company. The evidence shows this. It is in no way surprising that he should do so; as both the Chairman of the Directors, and the solicitor conducting its correspondence, he was the natural person who conducted this part of its affairs and made whatever decisions were necessary to constitute him the mind directing the company's affairs in this aspect of them. Having regard to these facts it is my opinion that Mr Zarb was as a matter of law to be equated with the company for the purpose of delivering notices to it and serving notices on it, and also for the purpose of stating whether it had received notices. He did these things. 39 My conclusion is that the notice of exercise of option was duly given and duly served in accordance with cl 9.1(a) and (b). The lessee is entitled to specific performance of its entitlement to a renewed lease. 40 Orders:

Comdox v Robins

At a glance

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Before

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Judgment (22 paragraphs)

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Cited By (13)