Connor & Anor v Kingswood Press P/L [1997] QCA 387

There was, as we have said, a counter-claim, but we shall not go into the details of that; the primary judge held that there was no such lease as the appellants alleged and it was common ground between the parties that unless the judge's conclusion that there was no agreement for a lease for a term could be upset, then the appeal must be dismissed. That was done - i.e. the appeal was dismissed - when the argument on that point concluded, the Court announcing that it would give reasons at a later date. These are the reasons for the course we have taken.

It is convenient first to turn to the principal documents. By a letter of 11 May 1988, addressed to the respondent, the appellant Connor purported to agree to lease the premises in question for 3 years with an option to lease for a further 3 year term, at a specified rental. The letter stated that the agreement was on condition that the respondent "install air conditioning and office partitioning and floor coverings as per our requirements". A document bearing the same date and executed by Connor, as well as by persons on behalf of the respondent, read:

"In reference to leasing agreement on Lot 16, Parramatta Road, Underwood, date 11/5/88, either party reserves the right to terminate this agreement without notice."

The other principal document is a letter dated 30 May 1988, written to "Kona Coffee Co", a business name of the appellants, containing a proposal to lease the premises at a lower rental than mentioned in the letter of 11 May 1988. The letter of 30 May 1988 also contained a promise by the respondent to install floor coverings, office partitions and air conditioning and to do certain other work not mentioned in the earlier letter.

Both these letters, that of 11 May and that of 30 May, said the rent was to be held firm for a year, but after that should rise in accordance with the Consumer Price Index. But in other respects the two letters were inconsistent. The most important difference between the two was that, whereas the letter of 11 May and the document of the same date, read together, contemplated a lease for a term with an option for renewal for a further term, but subject to a right to terminate without notice, the letter of 30 May made no reference to either subject. To revert to the pleading, the defence pleaded both the letter of 11 May and that of 30 May as containing part of the agreement between the parties. However, in his oral evidence, Connor appeared to put the appellants' case squarely on the basis of the letter of 30 May. His counsel showed him the letter of 30 May 1988 and Connor said, in effect, that there had been earlier discussions about the terms that were set out in it and that the letter was confirmatory of the earlier discussions. He said there were also later discussions in June and August - presumably meaning June and August 1988; and it was in June, Connor said, that "it was acknowledged . . . we were going to be the tenant".

Mr Lilley, for the respondent, contended that the evidence just referred to was inconsistent with the pleaded case, and that submission appears to be correct. Of course, such an inconsistency would not necessarily be fatal to the appellants' prospects of success; but the apparent abandonment, in presentation of the case below, of the suggestion that the letter of 11 May was part of a contract has an important consequence. The letter of 30 May, unlike that of 11 May, makes no reference to any term of a lease, nor to an option of renewal.

A difficulty which faced the appellants, even more formidable than that just referred to, was that of the principal witnesses with respect to discussions between the parties, had between P R Moody on behalf of the respondent and the appellant Connor for the appellants, the primary judge "greatly" preferred Moody's evidence to that of Connor. Moody gave evidence that, having acquired the building in question, the respondent set about finding tenants for that part of it which is the subject of this litigation. Moody said that the respondent gave "them" - apparently meaning one or both of the appellants - a proposal "as far as the rent rate, the area and so forth", to which "they said, `That's fine'". Then, according to Moody, he asked for a formal lease agreement to be prepared, but Connor objected to the fee the solicitors proposed to charge. After persuading the solicitors to reduce the fee Moody was told by Connor that he would not pay the lesser sum. Moody then suggested that each side pay half the solicitors' fee and that was also refused. Lastly, Moody said, the respondent offered to pay the whole fee for the lease, but Connor said he had "bucket loads of money" and asked for a price to buy half the building. A question arises as to whether the agreement for lease, if one was made, was intended to be binding immediately, or to be binding only when reduced to a comprehensive written form; see Marek v. Australasian Conference Association Pty Ltd [1994] 2 Qd.R. 521 at 527, 528. It seems to us that apart from the consideration discussed below, the appeal can hardly succeed, in view of the clear indications that the parties intended a formal legal document to be drawn up, dealing with this real property transaction having some complex aspects; but we do not decide the matter on that ground.

It appears that the account given by Moody was intended to be an explanation of what happened in response to the letter of 30 May 1988 which, it will be recalled, was written on behalf of the respondent. One fact which clearly emerges is that there was never any written reply on behalf of the appellants to the letter of 30 May. That is consistent with the impression, given by Moody's evidence, that the appellant evaded signing a formal lease committing them to liabilities as tenants, on the basis (or pretext) that they proposed to purchase instead.

Moody went on to say that some months later - the date does not precisely appear - the appellants moved into possession. He said, and it is common ground, that they did not have floor coverings and curtains installed by the respondent, as the letter of 30 May on which their case was ultimately based, contemplated; according to Moody's evidence, they simply moved in without any prior discussion. There followed, according to the judge's findings, a failure to pay the rental which should have been paid had there been a lease agreement, but it is unnecessary, as it appears to us, to discuss the details of that. The judge found that what happened after the letter of 30 May "is sufficiently indicated for present purposes" by certain of Moody's evidence which his Honour quoted at length. Candidly confessing the problems he had to overcome in doing so, Mr Couper Q.C. set out to persuade us that the primary judge was not entitled to accept what Moody said because, Mr Couper argued, it was inconsistent with documentary evidence. The question of interference with findings of fact dependent on questions of credit has been discussed in Brunskill v. Sovereign Marine & General Insurance Co. Ltd [1985] HCA 61; (1985) 59 A.L.J.R. 842, Jones v. Hyde [1989] HCA 20; (1989) 63 A.L.J.R. 349, Abalos v. Australian Postal Commission [1990] HCA 47; (1990) 171 C.L.R. 167, Devries v. Australian National Railways Commission (1993) 177 C.L.R. 472 and Zuvela v. Cosmarnan Concrete Pty Ltd [1996] HCA 30; (1996) 71 A.L.J.R. 29. It is unnecessary to elaborate on the difficulties faced by an appellant seeking to upset a trial judge's decision to accept the evidence of one witness over that of another, as to the content of conversations.

Moody said in effect, in the passage accepted by the judge, that after the letter of 30 May 1988 the respondent "finally agreed" that it would pay for the lease and Connor said:

"Look, I'm not interested in leasing it. What about coming up with a price to buy half the building?"

There followed certain discussion, a price was worked out and Connor was let know what it was. His response was, "That's great". When the respondent moved into the building on 7 September, subdivision of the building for the purpose of sale had not yet been approved. Moody said, as we have mentioned, that the appellants arranged for their own carpets and curtains; they did not pay rent for some months.

Mr Couper said that even if Moody's oral evidence were accepted, it amounted only to evidence of repudiation by the appellant of a preceding agreement for a lease, binding on both parties; Mr Couper argued that the repudiation was not accepted. That is, however, not a reasonable construction to put on the conversation. Connor's statement that the appellants were no longer interested in leasing the building but wanted to buy it came after, presumably in desperation, the respondent agreed to pay the whole costs to be charged by the solicitors for preparing a lease. Moody's reaction to Connor's proposal that the appellants buy part of the building they were to lease was not to insist upon the execution of an agreement for lease, or formal lease, or to pursue that aspect of the matter further, but rather to pick up Connor's suggestion of a sale and work towards that end. Further, according to Moody's evidence, when he asked why the appellants moved in, the reply was:

"Don't worry about it, we'll pay the rent at the agreed rate until we get the strata title through."

Subsequently, Moody said, the proposal for a purchase by the appellants was abandoned.

In the appellant's outline of argument, reliance was placed on the judge's supposed failure to take into account certain facts, when determining that there was no lease; these were that the respondent was to install floor coverings and attend to other matters. But as has been pointed out, that cannot assist the appellants' case because, inconsistently with the letter of 30 May 1988, it was the appellants, not the respondent, who (without any consultation with the respondent) installed floor coverings. Mr Couper, pursuing the argument that the primary judge acted unreasonably in accepting Moody's account of events in preference to Connor's, relied principally upon a letter of 15 December 1988, which was executed by Moody and by another director of the respondent, but was, on the evidence, prepared by the respondent's solicitors. It begins with a reference to the two letters discussed above, those of 11 May 1988 and 30 May 1988 and continues:

"We note that following this agreement to rent the premises you took occupation in October 1988".

"[T]his agreement" must be taken to be a reference back to the two letters and to be intended to convey that read together they constitute an agreement to lease. But that is, on any view, simply not so; the letter of 30 May is not an acceptance of the terms of that of 11 May, but a new proposal. Moody's evidence, as we read it, was to the effect that that new proposal made on 30 May 1988 was at least informally accepted. That conclusion, however, could not assist the appellants, for the letter of 30 May, as has been pointed out, made no reference to any term of the lease or option. Nevertheless, the letter of 15 May 1988 has some residual force as an argument against the judge's acceptance of Moody's evidence, because it at least manifests that the respondent was then contending that an agreement for lease then subsisted, whereas on Moody's evidence, the proposal to lease had been shelved and the parties went ahead on the basis that there would be a temporary tenancy pending the making of arrangements for sale.

It is not enough, however, in order to cause a finding on credit to be set aside, for the appellants to be able to point to solicitors having, on their understanding of their clients' instructions, drawn a letter which in an important respect adopts a stance which would not be a justified one, if events had proceeded in accordance with the evidence accepted by the judge. It is not every apparent conflict between contemporary documents and oral evidence which compels rejection of the latter.

There is reason to think that the appellant refrained from properly committing themselves to a lease, leaving, if possible, all their options open. As to that, not only does one have the evidence of the difficulties Connor made about having a proper lease drawn up, but there is the fact that the appellants did not trouble, as they could have done without any difficulty, to write to confirm what was at the trial asserted to be their intention - that despite any negotiations for purchase they were bound to a lease for a term. A simple explanation of their not having done this is that given by Moody - that, because Connor said the appellants wished to purchase rather than lease, the question of a lease was not pursued and it was stated by Connor (and, implicitly, accepted by the respondent) that there would be monthly rent paid at the agreed rate for the time being. The trial judge was entitled to accept the substance of Moody's evidence of what occurred in relation to the negotiations for a lease and his recollection that steps toward a lease agreement were supplanted by a proposal to purchase.

The judge's conclusion that there was, in the end, no such agreement for a lease as the appellants set up has not been shown to be incorrect; it appears, on the contrary, to be amply justified by the evidence.

It is for these reasons that the appeal has been dismissed with costs.