APPEAL - Practice and Procedure - Application for leave to appeal out of time from decision of Victorian and Administrative Tribunal ('VCAT') - Need to show good reason for delay - Retail premises lease - Application for leave to appeal granted but appeal dismissed - Picken v President etc of the Shire of Alexander [1890] VicLawRp 65; (1890) 16 VLR 309, 311; In the Marriage of J F and J E McAleese (1977) 3 Fam LR 11604, referred to - Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 148(2).

1 This is an application for an extension of time in which to apply pursuant to s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 for leave to appeal against orders of a Vice President of the Tribunal and for a stay of his Honour's orders pending the hearing and determination of the appeal. The parties have agreed that the hearing of the application should be treated as the hearing of the appeal.

2 For some time, the first applicant ('Cooma') carried on business as a purveyor of men's clothes from leased premises at 219-221 Thomas Street, Dandenong ('the Premises'). At all relevant times, the second and third applicants, Ravikumar Coomaraswamy and Subsashini Ravikumar ('the Coomaraswamys') were directors of Cooma.

3 The Premises were previously owned by Ibrahim and Sofia Afzal ('the Afzals') and leased to Yassal and Sushani Perera ('the Pereras') under a lease for a term commencing on 1 February 2007. The lease was later renewed for a further term commencing on 15 December 2009 and expiring on 31 January 2011.

4 During the first half of 2010, the Afzals entered into a contract of sale to sell the freehold reversion to the respondent ('CID') and, on 5 May 2010, CID's estate agent, Peter French, wrote to the Pereras, as follows:

Dear Yasal & Sushani,

RE: LEASE RENEWAL

Further to recent discussions I confirm that the property sale is pending settlement within the next couple of months, and the new owners are now considering plans for future redevelopment of the property.

We note that your current lease expires 31st January next year (copy attached) and that there is no further renewal option.

Before putting the property up for re-lease, the new owners have asked that we offer you first right of refusal to continue in tenancy, based on the following terms:

LENGTH OF LEASE: 3 years commencing 1st February 2011

RENTAL: $52,000 p.a. (plus outgoings and GST)

REVIEWS: Annual to CPI

SPECIAL CONDITIONS: The Lease will include a demolition or redevelopment clause whereby in the event that the Landlords wish to proceed with the redevelopment of the site, they will have the right to quit the lease and gain vacant possession of property. However, such a clause would not be actionable until 1st August 2012 at earliest, and 180 days prior written notice must first be given to the tenant.

In the event that no such notice is given, the tenant shall have the right to serve out its full 3 year term.

Please consider these terms and advise should you wish to proceed. The offer will remain exclusively yours for 7 days.

Please feel free to call should you have any queries.

Yours faithfully

PETER FRENCH

MANAGING DIRECTOR

5 On 12 May 2010, both Pereras affixed their signatures immediately below words typed at the foot of the second page of the letter:

'Re: 219 Thomas Street, Dandenong' ... 'We confirm acceptance to the above terms'.

6 On 1 June 2010, the Coomaraswamys executed a 'Transfer of Lease' document prepared by Cooma's solicitors, RTC Legal, Lawyers and Consultants. In the Tribunal's reasons for decision, the Vice President described the terms of that document, thus:

The transfer of lease was in the Law Institute standard form and showed Mr and Mrs Afzal as 'landlord', Mr and Mrs Perera as 'old tenant' and Cooma as 'new tenant'. It referred to a lease dated 15 December 2009, identified the premises and referred to a three year term commencing 1 February 2008, options nil. Transfer date was shown as 1 June 2010. The lease included the usual and standard transfer terms, in particular Clause 8. Guarantee and Indemnity provided inter alia:

8.1 The new tenant's guarantor -

8.1.1 guarantees that the tenant will perform all its obligations under the lease for the term and any renewed term or terms and during any period of overholding after the end of the term,

8.1.2 must pay on demand any amount which the landlord is entitled to recover from the tenant under the lease whether in respect of the term, any further term or further terms or any period of overholding, and

8.1.3 indemnifies the landlord against all loss resulting from the landlord having entered into this transfer of the lease whether from the tenant's failure to perform its obligations under it is from the lease being or becoming unenforceable against the tenant and whether in respect of the term, any renewed term or terms or any period of overholding.

There then follow further boilerplate guarantee clauses.

Special Conditions 15 ... provides:

15.1 The new Tenant has been given a copy of the letter from French Property of 5 May 2010 to Yasal and Sushani Perera (annexure) in relation to Lease renewal and acknowledge receiving the same. The New Tenant further acknowledges and consents to terms and conditions for the renewal of Lease on 1 February 2011.

15.2 Where the new Tenant is a corporation then upon a renewal of the Lease the new Tenant must provide guarantees from its Directors if required by the Landlord.

... The persons described as the new tenant's guarantor are Subsashini Ravikumar and Ravikumar Coomaraswamy who are the second and third respondents in this proceeding. The first respondent is Cooma Clothing Pty Ltd, the new tenant. I should also note the operation of Clause 12 of the Transfer of Lease which is headed 'Interpretation'.

Clause 12.7 says:

'tenant' means the person from time to time holding the premises as tenant under the lease and includes (without limitation) the new tenant.

7 The sale of the freehold reversion from the Afzals to CID was completed on 27 September 2010 and the transfer of the freehold reversion in favour of CID was registered on 1 November 2010. On 15 March 2011, Cooma vacated the Premises and it has not paid any rent since 1 February 2011.

8 Before the Tribunal, CID contended that Cooma was obliged to perform the covenants on the tenant's part to be performed under the lease for the further term of three years commencing on 1 February 2011, and that the Coomaraswamys were liable as guarantors for Cooma's performance of those obligations.

9 Cooma and the Coomaraswamys contended to the contrary that the lease was not renewed for the further term of three years commencing on 1 February 2011; all that occurred was that Cooma was given the benefit of an option to renew or extend the lease for the further term of three years commencing on 1 February 2011 which option it did not exercise.

10 Counsel for the applicants argued before the Tribunal that, in view of the definition of 'renewal' in s 9 of the Retail Leases Act, there were only two ways in which a lease could be renewed, namely: (1) by exercise of an option to renew contained in an expiring lease; and, (2) by entry into a new lease on substantially the same terms and conditions, except as to rent, as an expiring lease. In counsels' submission, what occurred in this case did not come within either of those descriptions. Specifically, the 'Renewal of Lease' document was not the exercise of an option to renew contained in the expiring lease (because the expiring lease did not contain an option to renew); and the 'renewal of lease' was not on substantially the same terms and conditions as the expiring lease except as to rent (because the demolition clause which appeared as a special condition in the 'renewal of lease' did not appear in the expiring lease).

11 Alternatively, counsel contended, if it were permissible under the Retail Leases Act for a landlord and tenant to enter into an executory contract for the renewal of a lease, Cooma and the Coomaraswamys never entered into such a contract. For, although they executed the 'Transfer of Lease' document, that document was not a complete agreement but such, it was submitted that, unless and until the parties executed more formal documentation, there were no binding obligations in respect of the period after 1 February 2011.

12 The Vice President rejected those contentions. His Honour held that, upon its proper construction, the Retail Leases Act did not prohibit a landlord and tenant entering into a binding executory contract for an entirely prospective lease; and, properly construed, that the execution of the Transfer of Lease resulted in a binding legal agreement for lease in accordance with its terms. In particular, although the Transfer of Lease contemplated the execution of further documents, objectively discerned its effect was the creation of an immediately binding agreement albeit with the intention that it be followed by a more complete and perfect assurance.[1]

13 Counsel for the applicant contended that, even if the Transfer of Lease constituted a binding executory contract, it referred only to a lease dated 15 December 2009 for a term of three years commencing on 1 February 2008 and, therefore, that the obligations of the guarantors for which it provided in clause 8 did not extend to any renewal of the lease.

14 The Vice President also rejected that contention. His Honour reasoned that:

The obligations of the new tenant's guarantor are as I quoted them earlier. The lease is said to be a lease of 15 April 2009 which is the lease which expired on 31 January 2011. Special condition Clause 15.1 which I have already quoted, to my mind makes sense only if it has the effect of extending the meaning of the lease as described in the schedule to the document, namely the expired lease, so as to extend to a further term as established by the letter of 5 May 2010.

When the Pereras ticked the box 'we confirm acceptance of the above terms' it seems to me quite clear that they did commit to a further three year term. I accept that in the circumstances this was not a renewal within the definition of that word in Section 9 of the Retail Leases Act. There is nothing in Section 9, however, which, as I read it would exclude the possibility of what one might describe as 'small r' renewals outside the definition. The definition of 'renew' or 'renewal' in the Retail Leases Act is material for a number of reasons. It is material as to the length of time that a tenant is in possession, for instance for the purposes of Section 13 of the Act where a tenant in possession for more than 12 months continuously of premises is entitled to a five year term and the advantages of the Act whereas a tenant in possession for less than that period is not. The definition of renewal is relevant to whether a lease is to be treated as a new lease or not and the obligations on disclosure. The effect would seem to be that the arrangements entered into between the Pereras and Create Invest Develop would be regarded as a new lease under the Retail Leases Act and not a renewal, but I see nothing in the statute that would prohibit such an arrangement from being legally enforceable. The absence of privity of estate creates no difficulty. It is well established that there is an estoppel between landlord and tenant. If two parties contract between one another as landlord and tenant, neither of them is entitled to deny the title of the other unless some other person by way of title paramount intervenes and disturbs the possession of landlord and tenant.

Accordingly, the fact that the freehold reversion did not become vested in Create Invest Develop Pty Ltd until 1 November 2010 and that it did not become entitled to receipt of the rents and profits until 27 September, according to the evidence I have heard, does not, as it seems to me, create any difficulty with the enforceability of the term.

Clause 8 of the transfer document does impose a guarantee obligation on the second and third respondents. The guarantee is not an especially elaborate one as guarantees go; but, without descending to its details, it is, in my view, adequate for the purpose and no specific guarantee type defence has been alleged on behalf of these respondents, namely the second and the third. Mr Naidu said that, insofar as the guarantee purported to extend to any renewed term or terms, it should be construed as applying only to renewals which were made in accordance with the definition in Section 9 of the Retail Leases Act. I see no reason to interpret Clause 8 in that way. First, there are terms defined in the transfer document and these terms, when used, are used in bold type. 'Renewal' or 'renewed' as a past participle in Clause 8.1 and elsewhere does not appear in bolded type. There is no reason to regard it as bearing a special defined meaning. Consideration of the document as a whole which is derived from the Law Institute standard shows that sometimes it applies to leases governed by the Retail Leases Act and sometimes it does not. Clause 6 for instance says:

Unless section 62 of the Retail Leases Act 2003 or the guarantee or indemnity given by the old tenant requires otherwise, this transfer does not end the obligations of the old tenant's guarantor ...

Accordingly, there is no reason to think that the word 'renew' or 'renewal' is used in any sense which is limited by the definitions in the Retail Leases Act.[2]

The obvious inference to draw is that Cooma entered into the arrangement that it did in the expectation that it would be staying for a term of years but that it repented of that intention when the circumstances surrounding the tenancy changed and it became a much less advantageous location.[3]

...

Mr Coomaraswamy said that, as he read or as he understood the arrangement, he had an entitlement to elect whether to take up the option which he believed existed at any time until 31 January. This is an inherently unlikely situation. It is at odds with the usual commercial and legal practice as to lease options. Moreover, it is at odds with the disclosure statement prepared by the solicitors for the Afzals and given on the 20th of May which nominates an option period of 31 July 2010 and 31 October 2010. If, as I expect, it was competent for these parties, before Create Invest Develop Pty Ltd became entitled to receive the rents and profits, to enter into their own arrangements for the future of the tenancy, then the fact that those acting for a different party, namely, the outgoing freeholder, put a different complexion on matters than the one which they appear to bear, based on the evidence before me, is neither here nor there.

In my view the applicant should succeed for the relief which it seeks in its points of claim. [The respondents denied liability but raised no particular issue as to quantum of damages.][4]

15 Ordinarily, an application for extension of time in which to appeal is not to be granted unless the applicant furnishes the court with a detailed explanation of the delay and a good reason for excusing it.[5] Here, the reason proffered is that, although the applicants' solicitors, RTC Legal, received notification of the Tribunal's determination on 16 November 2012, on the same day the Coomaraswamys left for Sri Lanka and they did not return until 19 December 2012. By then, RTC Legal had closed for the Christmas vacation and did not reopen for business until 14 January 2013. Upon reopening, RTC Legal discovered that a copy of the written reasons of the Tribunal had been sent on or about 17 December 2012 but it was not until 16 January 2013 that the Coomaraswamys contacted RTC Legal and received the written reasons. In the result, it was not until 17 January 2013 that the Coomaraswamys read the written reasons and then it took until 5 February 2013 for them to obtain advice and file an application for leave to appeal out of time.

16 The applicants had 28 days after provision of the written reasons to apply for leave to appeal.[6] Assuming in their favour that it took until 19 December 2012 for the written reasons to arrive at RTC Legal, it follows that they had until 16 January 2013 to apply within time. Although their approach to the matter strikes us as lamentably careless, given the nature of issues and the agreement of the parties that the hearing of the application may be treated as the hearing of the appeal, we are disposed to extend time and to grant leave to appeal. For the reasons which follow, however, we have concluded that the appeal should be dismissed

17 The questions of law on which the applicants sought leave to appeal were identified in their draft notice of appeal dated 14 February 2013 as follows:

4.1 On the proper construction of the letter of 5 May 2010 and s 3 of the Retail Leases Act 2003 (the Act), the respondent did not have the necessary privity of estate or contract to offer a renewal of the lease in question;

4.2 If the respondent did have the necessary privity of estate or contract to make the offer contained in the letter of 5 May 2010, then the letter constituted notice pursuant to s 64(2) of the Act;

4.3 On the proper construction of the letter of 5 May 2010, it did not comply with the meaning of renewal of lease given in s 9(b) of the Act;

4.4. That on the proper construction of s 3 of the Act, the letter of 5 May 2010 and the Transfer of Lease dated 1 June 2010, there was no concluded agreement between the applicants and the respondent;

4.5 That a prospective landlord and tenant may agree to execute a formal lease at some future stage, such a lease being enforceable only if it does not offend against the Act;

4.6 That on the proper construction of Special Condition 15.2 of the Transfer of Lease dated 1 June 2010, the 2nd and 3rd applicants were not liable to indemnify the respondent as guarantors of the alleged lease.

18 The first question reprises an argument advanced before the Vice President that, because of an absence of privity of estate, CID was unable by means of the letter of 5 May 2010 to enter into a binding agreement for lease with the Pereras.

19 As was earlier noted, the Vice President rejected the argument. His Honour's reasons were that:

... The absence of privity of estate creates no difficulty. It is well established that there is an estoppel between landlord and tenant. If two parties contract between one another as landlord and tenant, neither of them is entitled to deny the title of the other unless some other person by way of title paramount intervenes and disturbs the possession of landlord and tenant.

Accordingly, the fact that the freehold reversion did not become vested in Create Invest Develop Pty Ltd until 1 November 2010 and that it did not become entitled to receipt of the rents and profits until 27 September, according to the evidence I have heard, does not, as it seems to me, create any difficulty with the enforceability of the term.[7]

20 We have come to the same conclusion as his Honour although for partly different reasons. In our view, the issues are perhaps a little more complex than his Honour appears to have considered.

21 As his Honour said, there is no doubt that a tenancy may be created by estoppel. As is explained in Megarry and Wade:[8]

If a person with no estate in land purports to grant a tenancy of the land, the grant can pass not actual estate. Yet, even though the lessor's want of title is apparent to the parties, both the parties and their successors in title will be estopped from denying that the grant was effective to create the tenancy that it purported to create. There is thus brought into being a tenancy by estoppel under which the parties and their successors in tile have (as against one another) most of the rights and liabilities of an estate in land, although no estate is actually granted. (Citation omitted.)

If after creating a tenancy by estoppel the landlord later acquires a legal estate out of which the tenancy could be created (as where he purchases the fee simple), this is said to 'feed the estoppel': the tenant then at once acquires a legal tenancy in place of his tenancy by estoppel... (Citation omitted.)

Given the facts of this case, however, it does not seem to us that landlord and tenant estoppel of itself can be the end of the inquiry.

22 We agree with the Vice President that the letter of 5 May 2010 and its acceptance by the Pereras constituted an executory contract for the creation of a new tenancy of three years commencing on 1 February 2011. But the problem is that it was a contract between CID and the Pereras, not CID and Cooma. Hence, while landlord and tenant estoppel could have prevented the Pereras denying that there was a relationship of landlord and tenant as between CID and the Pereras, it could not have established a tenancy for three years commencing on 1 February 2011 which was binding on Cooma. As Lord Hoffman observed in Bruton v London & Quadrant Housing Trust:[9]

... it is the fact that the agreement between the parties constitutes a tenancy that gives rise to an estoppel and not the other way around.

23 Certainly, there was then the Transfer of Lease executed on 1 June 2010 between the Afzals, the Pereras, Cooma and the Coomaraswamys. According to the natural and ordinary meaning of its terms, its purported effect was to transfer from the Pereras to Cooma both Pereras' rights and obligations under the original lease and the Pereras' rights and obligations under the executory contract with CID for the grant of a new lease commencing on 1 January 2011. It is in that latter respect, however, that more complex issues arise.

24 Although the original lease was not registered,[10] it was a legal lease. That was so because section 66 of the Transfer of Land Act 1958 ('TLA') provides for the registration of only those tenancies which are for a term in excess of three years[11] and because the original lease was for a term of not more than three years.[12] As a legal lease, the original lease conferred on the Pereras a legal estate with which both the benefit and burden of the lease covenants could run.[13] Consequently, it was open to the Pereras to assign both their rights and obligations under the original lease; and, hence, by execution of the Transfer of Lease of 1 June 2010, Cooma became both entitled to the benefit and subject to the burden of the original lease covenants.[14]

25 In contrast, the letter of 5 May 2010 and the acceptance of its terms by the Pereras, gave rise only to an equitable lease between CID and the Pereras;[15] and, under general law, an equitable lease does not create a legal estate with which the benefit and burden of lease covenants may run.[16] So, while a party to a contract for a lease may assign the benefit of the contract, the burden of it cannot be assigned.[17] It follows that, although the Transfer of Lease of 1 June 2010 was effective as an assignment of the benefit of the executory contract for the grant of a new lease commencing on 1 January 2011, as a matter of general law it was incapable of subjecting Cooma to the burden of the contract.[18] And, under general law, that would have remained so even after Cooma later entered into possession under the original lease and paid rent under the original lease.[19]

26 In Boyer v Warbey,[20] Denning LJ held that the law in England had developed to a point which warranted a different conclusion. His Lordship stated that:

I know that before the Judicature Act 1873, it was said that the doctrine of covenants running with the land only applied to covenants under seal and not to agreements under hand: see Elliott v Johnson.[21] But since the fusion of law and equity the position is different. The distinction between agreements under hand and covenants under seal has been largely obliterated. There is no valid reason nowadays why the doctrine of covenants running with the land - or with the reversion - should not apply equally to agreements under hand as to covenants under seal; and I think we should so hold, not only in the case of agreements for more than three years which need the intervention of equity to perfect them, but also in the case of agreements for three years or less which do not...[22]

27 The authors of Australian Real Property Law[23] suggest that his Lordship's observations may be equally relevant in this country. With respect, however, we do not think that they are applicable. As appears from the judgment, the notion that there is no relevant difference between a legal covenant and an agreement under hand is a manifestation of the fusion fallacy which has been rejected in this country.[24] As Spigelman CJ remarked in Harris v Digital Pulse Pty Ltd,[25] the separation of equity and common law 'is of greater strength in Australian jurisprudence than appears to have become the case in other nations with similar traditions'. Here it remains that, until and unless an order for specific performance has been made and carried into effect, the holder of an equitable estate has no interest at law. Accordingly, while it is competent for a party to a contract for the grant of a lease to assign the benefit of the contract, the absence of privity of estate as between the putative lessor and the assignee means that the assignor is incapable of assigning the burden of the agreement to the assignee.[26]

28 After the Transfer of Lease was executed between the Afzals, the Pereras and Cooma, on 1 November 2010 CID acquired the legal reversion upon registration as proprietor of the Premises. Under sections 141 and 142 of the Property Law Act 1958 ('PLA'), the rights and obligations of a lessor under a lease comprise part of the reversionary estate. It follows that, upon CID's registration as proprietor, CID became entitled to the benefit and subject to the burden of the original lease covenants.

29 Additionally, by reason of s 154 of the PLA, a contract for lease is a lease within the meaning of sections 141 and 142. It follows that, if the Afzals had entered into a contract to grant a new lease to the Pereras commencing on 1 February 2011, on registration of CID as proprietor CID would have become entitled to the benefit and burden of the contract. The difficulty with that, however, as has been observed, is that the contract for new lease was made not made between the Afzals and the Pereras, but rather as between CID and the Pereras; and, consequently, although the Pereras (by means of the Transfer of Lease of 1 June 2010) were able to assign the benefit of the contract to Cooma, as a matter of general law they were incapable of assigning the burden of it.

30 Certainly, by the Transfer of Lease, Cooma explicitly:

Acknowledge[d] and consente[d] to terms and conditions for the renewal of Lease on 1 February 2011.

Like the Vice President, we construe that as a promise by Cooma to the Afzals and possibly also the Pereras to observe the provisions of the executory contract for new lease between CID and the Pereras, of which the benefit was assigned to Cooma by means of the Transfer of Lease. But it has not been argued, and it could not be under general law principles, that the Afzals thereby contracted with Cooma to grant Cooma a new lease commencing on 1 February 2011. The promise to create the new lease was made by CID and was always intended as such. Such rights as the Afzals acquired by reason of Cooma's acknowledgment and consent were rights acquired otherwise than under a contract for a lease entered into by the Afzals. As a matter of general law, therefore, such rights would not have formed part of Afzal's reversionary estate which passed to CID upon its acquisition of the legal reversion.

31 The Afzals might perhaps be regarded as having received the benefit of Cooma's acknowledgement and consent on trust for CID.[27] But the right to enforce the acknowledgment and consent against Cooma would still have lain with the Afzals.[28] Hence, in order to enforce the acknowledgment and consent, it would have been necessary for the Afzals in their own names to seek specific performance of it on behalf of CID;[29] or, if the Afzals declined to adopt that course, for CID to have instituted proceedings under the acknowledgment and consent against Cooma and joined the Afzals as further defendants to the proceeding.[30] Alternatively, CID might have sued the Pereras as obligors under the contract for new lease and left it to the Perreras to pursue their rights over against Cooma under the Transfer of Lease (assuming that Cooma's acknowledgment and consent was intended to operate as an acknowledgment and consent in favour of the Pereras). As it happens, none of that was done.

Position under Retail Leases Act

32 Section 21 of the Retail Leases Act provides that the term of a retail premises lease must be at least five years and that, in the case of a lease which is entered into contrary to that requirement, the term is extended to the period necessary to ensure compliance. Since the original lease was for a term of less than five years - in effect only four years including the renewal to 31 January 2011 - it may be taken to have been extended by s 21(4) to a term of five years. As an unregistered lease for a term of five years, it might also be (although it is unnecessary to reach a conclusion about it for present purposes) that it was but an equitable lease, because a lease for a term of more than three years is registrable under s 66 of the TLA.

33 Similarly, as has been seen, the letter of 5 May 2010 and the Pereras' acceptance of its terms constituted an executory contract between the Afzals and the Pereras for a new lease of three years' duration commencing on 1 February 2011 and, therefore, an equitable lease of that duration.

34 As opposed to the position under general law, however, under s 3 of the Retail Leases Act, a 'lease' includes an agreement for lease and, under s 8, an assignment of a 'lease' results in a continuation of the lease as opposed to the creation of a new lease. Those provisions dictate that, inasmuch as the Transfer of Lease operated as an assignment from the Pereras to Cooma of the executory contract for new lease as between CID and the Pereras, it operated as a continuation of the contract as between CID and Cooma.

35 Logically, it follows that, despite the original lack of privity of contract or estate as between CID and Cooma, the Transfer of lease was in effect deemed by s 8 to have created privity of contract as between them and thus conferred on CID a direct right of enforcement against Cooma.

36 The answer to the second question of law follows inexorably from the first. As the applicant contended, and the Vice President accepted, the letter to the Pereras of 5 May 2010 could not have been a notice of renewal pursuant to s 64(2) of the Retail Leases Act, because: (a) there was no option to renew contained in the lease; and (b) given the inclusion of the redevelopment clause in the new lease, it was not a lease on substantially the same terms as the original lease.[31]

37 As to the third proposed question of law, the Vice President held in effect that it should be answered: 'yes', but that it did not avail the applicants, because:

The definition of renewal is relevant to whether a lease is to be treated as a new lease or not and the obligations on disclosure. The effect would seem to be that the arrangements entered into between the Pereras and Create Invest Develop would be regarded as a new lease under the Retail Leases Act and not a renewal, but I see nothing in the statute that would prohibit such an arrangement from being legally enforceable.[32]

38 With respect, we are unable to discern any error in that part of his Honour's analysis. As the applicants argued under Question 1, and the Vice President concluded, the acceptance of the terms of the letter of 5 May 2010 resulted in a new lease which was not a 'renewal' within the meaning of the Retail Leases Act. In our view, it does not detract from that rectitude of that conclusion that the parties referred to the new lease in their correspondence as a 'renewal'. The Retail Leases Act aside, it is unsurprising that the parties should conceive of a new lease granted on substantially the same terms and conditions as an existing lease (except for the inclusion of a development clause) as a 'renewal' of the expiring lease; and, as the Vice President explained, there is nothing in the statute which prohibits such an arrangement from being legally enforceable.

39 The fourth question of law was decided by the Vice President, against the applicants, as follows:

The letter appears to contemplate that there will be a further lease document executed and none ever was. The Transfer of Lease contemplates that, if the landlord requires, there will be more director's guarantees entered into, but they never were. That in itself does not mean that there is no arrangement which the law will enforce. In the celebrated case of Masters v Cameron[33] ... the High Court of Australia said that there are at least three situations in which an informal arrangement which contemplates the execution of further, more formal documents, need to be considered. The first is where the parties have entered into an informal agreement, contemplate that there may be more formal documents executed later, but have committed to a deal and to a contract independently of whether those more formal documents are ever executed or not. The second is one where the parties enter into an arrangement, one of the terms of which is that more formal documents will be entered into. Again, this is an enforceable contractual arrangement and a court or tribunal having jurisdiction may order, as a matter of specific performance, the parties to execute the more formal document. The arrangement is enforceable in the meantime, however. The third situation is where the parties have signed certain documents, contemplate that there will be more formal documents but intend that, unless and until those more formal documents are executed, there will be no final arrangement and no binding contract. It is only if parties act in the manner contemplated by this third class that there will be no enforceable arrangement.[34]

...

In my view, the fact that the parties did execute a relatively formal document, namely the transfer of lease which includes the clauses which I have described, and the other indicia, namely that Cooma did complete its arrangements with the Pereras and enter into possession, points away from this arrangement being in the third class. Rather, it is in the second class. There were further documents contemplated but they have not been executed. The absence of those further documents however does not exclude possible liability. Mr Naidu, also in reference to evidence from his client, Mr Coomaraswamy, and in various submissions made, remarks to the effect that the parties were not ad idem and that Mr Coomaraswamy, as the principal of Cooma, clearly did not intend for Cooma to enter into a final commitment. Rather, he was looking for a more flexible arrangement in which Cooma would have an option to take up a further three year term or not as it saw fit. The changes in the area, including the movement of the bus stops, made it disadvantageous for Cooma to commit to a further three year term and it did not.[35]

40 We are unable to detect any error in that part of his Honour's reasoning either. Where parties to a contractual arrangement express a commercial arrangement as being 'subject to contract' they may be taken to intend that the creation of a binding contractual relationship is to be postponed until a formal contract has been drawn up and executed.[36] Particularly is that so when the subject matter of the arrangement is the sale of or other dealing with land.[37] But, even then, as McHugh JA said in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd,[38] the decisive issue is always the intention of the parties to be ascertained objectively from the terms of the documents when read in the light of the surrounding circumstances.[39] So, where parties to a commercial arrangement concerning land signify an intention to be bound immediately, sometimes even if only to the extent that their arrangement be a 'legally binding agreement in principle', they may be taken to intend to be bound forthwith.[40]

41 In this case, the choice offered to the Pereras in the letter of 5 May 2010 was for them either to accept the terms of the new lease offered in the letter or vacate the Premises at the end of the existing term. By their execution of the acceptance typed at the end of the letter, they unequivocally chose the former. In our view, the terms of the arrangement so constituted bespoke an agreement for the grant of a new lease which was intended to be binding forthwith. Similarly, as the Vice President noted, the fact that the Afzals and Cooma subsequently executed such a relatively formal document as a Transfer of Lease was a powerful indication that, as between Afzals and Cooma, the intention was to be bound forthwith.

42 Needless to say, the Transfer of Lease could rise no higher as an enforceable agreement for lease than the agreement for lease between CID and the Pereras which the Transfer of Lease purported to transfer.[41] In that respect, it is to be noted that the Transfer of Lease described the 'lease' in the schedule as the Lease dated 15 December 2009 for a period of three years commending 1 February 2008 with nil options. Taken alone, that would tend to imply that the 'renewal' was not included. But the Transfer of Lease must be read as a whole, and so as including Special Condition 15.1; and, as has been seen, that clause expressly provided that Cooma acknowledged and consented to the terms and conditions for the renewal of Lease on 1 February 2011. It follows in our view, as the Vice President concluded, that:

Special Condition 15.1 ... makes sense only if it has the effect of extending the meaning of the lease as described in the schedule to the document, namely the expired lease, so as to extend to a further term as established by the letter of 5 May 2010.[42]

43 The fifth question of law adds little to the fourth. Like the Vice President, we see no reason to doubt that the agreement for new lease comprised of the Pereras' acceptance of the terms of the letter of 5 May 2010 and the Transfer of Lease to Cooma did not offend against the Retail Leases Act and was not otherwise unenforceable.

44 The sixth question of law reiterates the argument advanced below that, inasmuch as the guarantee purported to extend to any renewed term or terms, it should be construed as applying only to renewals conforming to the definition of renewal in s 9 of the Retail Leases Act.

45 As has been noted, the Vice President rejected the argument on the basis that there was no reason to regard the term 'renewal' as used in the Transfer of lease as bearing a special defined meaning. We agree.

46 Admittedly, the liability of a guarantor is strictissimi juris, with the consequence that any ambiguity is to be construed in favour of the surety.[43] It follows that, if there were any doubt about what was meant by the expression in Clause 8.1.1: 'obligations under the lease for the term and any renewed term or terms', the doubt would have to be resolved in favour of the Coomaraswamys.

47 Like the Vice President, however, we do not consider that there is any room for doubt. Given that clause 8.1 of the Transfer of Lease must be read in the context of the whole of the document, its natural and ordinary meaning is that 'the lease for the term and any renewed term'[44] includes the additional term of three years constituted by the 'the renewal of Lease[45] on 1 February 2011'. As the Vice President said, Special Condition 15.1 makes sense only if it has the effect of extending the meaning of the 'lease' as described in the Schedule to the Transfer of Lease so as to include the further term established by the letter of 5 May 2010.

48 In Chan v Cresdon Pty Ltd,[46] the High Court held that, in light of the settled principle that ambiguous contractual provisions should be construed in favour of a surety, a guarantee of the obligations of a lessee 'on its part to be performed under this lease' should not be read as extending to the obligations of a tenant under a lease in registrable form which had not been registered in accordance with the Property Law Act 1974 (Qld). Counsel for the applicant argued that there are such similarities between Chan v Cresdon and this case that similar reasoning should apply.

49 Closer examination shows, however, that there are several essential differences. In Chan v Cresdon, the parties entered into an agreement for lease of more than three years which provided that the parties would execute a lease in registrable form in the form annexed to the agreement. The annexed form contained a guarantee by the appellants of the obligations of the lessee 'under this lease'. And an instrument in the annexed form was executed simultaneously with the agreement but it was never registered. Like s 40(1) of the Transfer of Land Act 1958 (Vic), s 43 of the Property Law Act 1974 (Qld) provided that, subject to the Act, an instrument is not effectual to created an interest in land until registered. It followed, the court held, that the tenants did not have any obligations 'under this lease'. The court noted that the antecedent agreement for lease '[brought] into existence or evidence[d] an equitable lease'[47] and imposed on the tenants obligations the same as would have arisen under the lease if registered. But that was not enough. Since the guarantee was contained in the form of lease, and referred to the tenant's obligations 'under this lease', it could not be construed as extending to obligations of the tenant under the equitable lease which arose from the antecedent agreement for lease. As the plurality explained:

What they guaranteed was the 'obligations [of the tenant] under this lease', that is , the instrument of lease in its character as a lease. In our view, only a lease at law would meet this description for the purposes of the guarantee...[48]

50 In this case, the position is different. Here the guarantee was contained in the Transfer of Lease which included Cooma's acceptance of the terms of the letter of 5 May 2010 and its agreement to be bound by them. As the Vice President held, Special Condition 15.1 of the Transfer of Lease made sense only if it had the effect of extending the meaning of the lease as described in the schedule to the Transfer of Lease to the further term established by the letter of 5 May 2010. Additionally, even if registration of the 'lease' were possible, it was obviously never contemplated. In contrast to the position in Queensland, in this state registered leases are relatively rare.[49] Read against the background of those circumstances, the natural and ordinary meaning of the reference in clause 8.1 of the Transfer of Lease to the obligations of the tenant 'under the lease for the term or any renewed term' is the obligations of the tenant under the equitable lease constituted or evidenced by the agreement for lease.

51 Finally, on this aspect of the matter, it remains to acknowledge, as counsel for the applicants emphasised repeatedly in the course of argument, that Special Condition 15.2 of the Transfer of Lease expressly provided that:

Where the new Tenant is a corporation, then upon a renewal of the Lease the new Tenant must provide guarantees from its Directors if required by the Landlord,

There were no such guarantees provided from the Coomaraswamys.

52 Contrary to counsel's submission, however, it does not follow that the parties should be taken to have intended that the Coomaraswamys would not be bound in respect of the new term of three years until further guarantees were taken from the Coomaraswamys. The better view of Special Condition 15.2 is that it was intended to operate generally in respect of any renewal, of which conceivably there might have been any number before the relationship of landlord and tenant ultimately came to an end, whereas clause 8.1 was intended to operate specifically and forthwith as a guarantee by the Coomaraswasmys of Cooma's obligations as lessee under the 'renewal' evidenced by the letter of 5 May 2010 and assigned by the Pereras to Cooma.

53 During the course of oral argument, counsel for the applicants sought and was granted leave to advance as a further question of law whether the Vice President erred in law in holding that CID was entitled to enforce the guarantee against the Coomaraswamys despite an absence of privity of contract between CID and the Coomaraswamys. In counsel's submission, although the burden of the lessees' obligations under the agreement for new lease may have been assumed by Cooma by reason of the Transfer of Lease, the Coomaraswayms never contracted with CID in terms of the guarantee, and there was no other basis to conclude that CID was entitled to the benefit of the guarantee.

54 We do not accept the argument. Although, generally speaking, an assignment of the benefit of a principal obligation does not without more assign the benefit of a guarantee of the obligation,[50] the obligations of a guarantor of a lessee's obligations under a lease of land touch and concern the land and thus are enforceable by an assignee of the legal reversion without need of express assignment of the benefit of the guarantee.[51]

55 By the Transfer of Lease, the Coomarawamys covenanted with the Afzals, in the terms of clause 8.1 of the document, to ensure that Cooma would perform all its obligations as lessee under the new lease. As it appears to us, that was a covenant which touched and concerned the land because: (1) it was for the benefit only of the reversioner; (2) it affected the nature, quality, mode of use or value of the reversion from time to time; and (3) it was not expressed to be personal (in the sense of given only to a specific reversioner).[52] As a covenant which touched and concerned the land, it comprised part of the Afzals' reversionary estate which, by reason of s 140 of the PLA, passed to CID upon CID's registration as proprietor of the reversion. On

that basis, CID was entitled to enforce the guarantee against the Coomaraswamys, as the Vice President held to be the case.

56 In the result, we shall extend time in which to appeal, and grant leave to appeal, but we shall dismiss the appeal.

[1] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360-361 (Dixon CJ, McTiernan and Kitto JJ).

[5] Picken v President etc. of the Shire of Alexander [1890] VicLawRp 65; (1890) 16 VLR 309, 311; see also In the Marriage of J F and J E McAleese (1977) 3 Fam LR 11604, 11607 (Emery J).

[6] Victorian Civil and Administrative Tribunal Act 1998, s 148(4).

[8] Megarry and Wade, The Law of Real Property, 2nd Ed 632; see also Bradbrook, MacCallum Moore and Grattan, Australian Real Property Law, 5th Ed, [1.70].

[9] [1999] UKHL 26; [2000] 1 AC 406, 416.

[10] Transfer of Land Act 1958, s 40.

[11] See B A Helmore, Millard on Real Property (NSW), 6th Ed, Chapter XVII, [34]; Bradbrook, MacCallum, Moore and Grattan, Australian Real Property Law, 5th Ed, [8.110].

[12] It was not suggested and therefore we do not stay at this point to consider whether, because of s 21(4) of the Retail Leases Act, the lease should be regarded as being a lease of five years which was registrable.

[13] Spencer's Case (1583) 5 Co Rep 16a, 77 ER 72 (KB); Megarry & Wade, 616; Bradbrook, MacCallum, Moore and Grattan, [14.255] and [14.230].

[14] Humberstone Estates Ltd v Allen [1941] 2 KB 317, 320; Weg Motors Ltd v Haley [1962] Ch 49, 73 (Evershed MR).

[15] Under the rule in Walsh v Lonsdale (1882) 21 Ch D 9, 14-15 (Jessel MR).

[16] MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515, 520-521 (Dixon CJ); Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11, [33]-[37] (McLure J); compare the tentative suggestions to the contrary in De Luxe Confectionary Ltd v Waddington [1958] NZLR 272, 278 (Gresson J), 283-4 (McGregor J), sed per contra 289 (Shorland J).

[17] Purchase v Lichfield Brewery Co [1915] 1 KB 184, 187 ( Horridge J) and 188-9 (Lush J); cf Boyer v Warbey [1953] 1 QB 234, 245-6 (Denning LJ); De Luxe Confectionary Ltd v Waddingon, ibid.

[18] Even if the Transfer of Lease were intended to create a lease, it was not made by deed. Section 54(2) of the PLA permits the creation by parol of a lease taking effect in possession. But in Haselhurst v Elliot [1945] VicLawRp 24; [1945] VLR 153, it was held that the words 'taking effect in possession' require the lease to commence immediately. That was not the case here.

[19] Ibid 617; Cox v Bishop [1857] EngR 376; (1857) 8 DeGM & G 815, 44 ER 604; Rodenhurst Estates v Barnes [1936] 2 All ER 3, 6 (Merriman P) and 12 (Scott LJ).

[20] [1953] 1 QB 234,

[21] (1868) LR 2 QB 120.

[22] Ibid 245-6 (Romer LJ agreeing, Evershed MR dubitante).

[24] Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367, 392 (Windeyer J); Meagher Gummow and LeHane's Equity, Doctrine and Remedies, 4th Ed [2-100].

[25] [2003] NSWCA 10; (2003) 56 NSWLR 298, 305-6 [15].

[26] Chronopoulos v Caltex Oil (Australia) Pty Ltd [1982] FCA 272; (1982) 45 ALR 481, 489 (Fox J); Meagher Gummow & Lehane, [2-195].

[27] Les Affreteurs Reunis Societe Anonyme v Leopold Walford Ltd [1919] AC 801, 806 (Lord Birkenhead LC); Lloyds v Harper (1880) 16 Ch D 290, 315 (James LJ), 317 (Cotton LJ); cf Marks v CCH Australia Ltd [1999] 3 VR 513 (Mandie J).

[28] Tweddle v Atkinson [1861] EngR 690; (1861) 1 B&S 393; 121 ER 762; Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, 853 (Viscount Haldane LC); Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460, 478 (Barwick CJ); cf Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, 123 (Mason CJ, Wilson J).

[29] Coulls v Bagot's Executor and Trustee Co Ltd [1967] HCA 3; (1967) 119 CLR 460, 503 (Windeyer J).

[30] United States Trust Company of New York v Master and Crew of Ship 'Ionian Mariner' (1997) 77 FCR 563, 587-8 (Black CJ).

[33] [1954] HCA 72; (1954) 91 CLR 353.

[36] Eccles v Bryant and Pollock [1948] Ch 93, 99; cf Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661, 667.

[37] Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528, 532-3; cf. Storer v Manchester City Council [1974] 1 WLR 1403, 1408 (Stephenson LJ).

[38] (1986) 40 NSWLR 631, 634.

[39] Citing Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629, 638; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, 332-4, 337.

[40] G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631.

[41] As already noted, under s 8 of the Retail Leases Act, an assignment of a retail premises lease is taken to be a continuation of a lease.

[43] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549, 561; Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242, 256.

[46] [1989] HCA 63; (1989) 168 CLR 242, 247.

[49] Generally speaking, parties to a lease are prepared to rely on s 42(2)(e) of the Transfer of Land Act 1958: Downie v Lockwood [1965] VicRp 38; [1965] VR 257, 260 (Smith J); Brooking & Chernov, Tenancy Law and Practice 2nd Ed, [445].

[50] Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5, 12.

[51] Lang v Asemo Pty Ltd [1989] VicRp 67; [1989] VR 773, 775-776; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10; (2008) 234 CLR 237, 270 [101]-[272] [106].

[52] P A Swift Investments v Combined English Stores Group Plc [1988] UKHL 3; [1989] AC 632, 641-642 (Lord Oliver of Aylmerton ); Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd, ibid, 264 [74] and 270 [103].