Fiver Trading Pty Ltd v Spajack Pty Ltd

Supreme Court of NSW|2005-06-03|Before: Barrett J, Mr J

CITATION : Fiver Trading Pty Ltd v Spajack Pty Ltd [2005] NSWSC 532

HEARING DATE(S) : 15/03/05, 16/03/05, 17/03/05 Written submissions: 04/04/05, 22/04/05, 12/05/05

DECISION : Proceedings dismissed with costs

CATCHWORDS : LANDLORD AND TENANT - creation of relationship of landlord and tenant - alleged oral lease - whether concluded oral contract for lease - no question of principle - turns on own facts

Briginshaw v Briginshaw (1938) 60 CLR 336 Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167 CASES CITED : George v Cluning (1979) 28 ALR 57 Vella v Wah Lai Investment (Australia) [2004] NSWSC 748 Walsh v Lonsdale (1882) 21 ChD 9

Fiver Trading Pty Limited - Plaintiff Spajack Pty Limited - First Defendant Stephen Dempsey - Second Defendant PARTIES : Noeleen Astley - Third Defendant

Mr J.F. Hassett, Solicitor - Plaintiff COUNSEL : Mr R.D. Newell - Defendants

Hassett Dixon - Plaintiff SOLICITORS : l.C. Muriniti & Associates - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2311/03 - FIVER TRADING PTY LTD v SPAJACK PTY LTD & 2 ORS JUDGMENT 1 By an amended statement of claim filed on 16 February 2005, the plaintiff (Fiver Trading Pty Ltd) claims damages of $24,688.94. In doing so, it alleges an oral lease between the plaintiff and the first defendant (Spajak Pty Ltd) created by words spoken in a conversation between Mr Sussmann on behalf of the plaintiff and Mr Dempsey on behalf of Spajack. The authority of the individuals to speak for and bind the respective companies is not disputed. The oral lease is said to have been granted and taken in or about March 2000 and affected ground floor showroom premises at 1228 Pittwater Road, Narrabeen. It is pleaded in paragraph 9 of the amended statement of claim: "By an agreement made in or about March 2000 the Plaintiff agreed to lease the premises to the First Defendant on a monthly basis upon the same terms and conditions and subject to the same guarantees as the written agreement made with Paltrin Pty Limited referred to in paragraphs 5, 6, 7 and 8 above. Particulars The agreement was oral and was made between Philip Sussmann of the Plaintiff and Stephen Dempsey of the First Defendant." 2 The "written agreement" referred to in paragraphs 5, 6, 7 and 8 was a registered lease entered into in 1996 between the plaintiff as lessor and a company called Paltrin Pty Ltd as lessee. Mr Dempsey and his then wife were the shareholders in and directors of Paltrin. They guaranteed performance of the lease by Paltrin as lessee. The term of that lease began on 23 October 1996 and ended on 22 October 1999. There was an option to renew but there is nothing in the evidence to suggest that the option was exercised and the necessary inference is that Paltrin was, in March 2000, holding over on a monthly basis. A business of selling spa baths was conducted in the premises. 3 The plaintiff pleads several specific terms of the alleged oral lease, including that the first defendant would pay rent to the plaintiff at the rate of $3,910.00 per month (plus GST) from 1 July 2000. 4 The plaintiff also pleads a second oral lease between the plaintiff and the first defendant, again formed by words spoken in a conversation of 18 September 2000 between Mr Sussmann and Mr Dempsey. This alleged lease concerned a garage adjoining the showroom. That lease was said to reserve a rent of $433.33 (plus GST) per month. There is nothing in the affidavits read by the plaintiff that in any way supports or seeks to make good the allegation that any relevant conversation about a garage occurred on 18 September 2000 or at all, much less to show what its content was. 5 The plaintiff alleges breaches of the leases as follows: (a) failure to pay rent from 1 June 2002 to 16 June 2002 (the later date being, on the plaintiff's case, the date on which the first defendant vacated); (b) failure to repair or replace, upon vacating the premises, certain fixtures and fittings that had been damaged or removed. 6 A total of $2,513.12 is claimed for rent, GST and outgoings. Damages for breaches of the supposed covenant to repair were particularised as Cost to remove damaged neon sign $ 1,102 . 20 Cost to replace neon sign 2,600 . 00 Cost to replace glass breakage 704 . 00 Cost to repair and replace garden 10,071 . 60 Cost to replace carpets 3,885 . 75 Cost to replace aluminium window frames 1,958 . 00 Cost to repair walls 715 . 00 Cost to repair tiles at entry 320 . 00 Cost to repair electrical wiring 200 . 00 Cost to remove and replace locks and keys 380 . 00 7 The defendants, by their defence, do not admit the allegations of fact concerning formation of the oral agreement and say that, if such an agreement were formed, it would not comply with s.23C(1)(a) or s.54A of the Conveyancing Act 1919 or the Retail Leases Act 1994. The defendants also say that there was no consideration for the alleged guarantees of the defendants' performance. The allegations regarding the alleged lease of the garage are not admitted. The defendants deny any indebtedness to the plaintiff. 8 The total claim is, as I have said, $24,688.94. As one might expect, proceedings were initially commenced in the Local Court. But when it became clear that reliance would be placed on an oral lease, the plaintiff needed to invoke equitable principle and therefore commenced new proceedings in this court. I heard the proceedings over two and a half days on 15, 16 and 17 March 2005. Written submissions were furnished by counsel on 4 April 2005, 22 April 2005 and 12 May 2005. The transcript runs to more than 200 pages. The significant application of time and resources by the parties was over a claim for $25,688.94. 9 The equitable principle on which the plaintiff relies is most often associated with Walsh v Lonsdale (1882) 21 ChD 9. That case was recently described and discussed by Campbell J in Vella v Wah Lai Investment (Australia) [2004] NSWSC 748: "153 … In that case, the plaintiff and defendant had agreed that the defendant would lease a mill to the plaintiff, on terms which required a certain part of the rent to be paid in advance. The plaintiff went into possession, and paid rent in arrears for some years. The defendant made a demand for the rental which it claimed was payable in advance, then two days later, when that amount had not been paid, put in a distress. The plaintiff began an action claiming damages for improper distress, an injunction to restrain the defendant from selling under the distress and from continuing in possession, and specific performance of the agreement for lease. Fry J granted an interlocutory injunction requiring the defendant to withdraw from possession under the distress, on terms that the plaintiff pay into court the amount the defendant claimed. The plaintiff appealed against the imposition of that term on the grant of the interlocutory injunction.

154 At the appeal, the plaintiff based one strand of his argument on a question of principle. He said that he was a tenant from year to year at law, and that at law the tenancy which existed was one whereby the rent was payable in arrears. Distress being a legal remedy of a landlord, the plaintiff submitted, it could not arise from a mere agreement to lease. 155 The Court of Appeal continued to require it as a term of the interlocutory injunction that money be paid into court, though the amount required was reduced, because the Court of Appeal took a different view to Fry J about the proper construction of the rental clause in the agreement. Further, on the appeal it was conceded that the agreement for lease was one which was specifically performable. It was in that context that Jessel MR made his oft repeated statement, at 14-15: 'Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance. That being so, he cannot complain of the exercise by the landlord of the same rights as the landlord would have had if a lease had been granted. On the other hand, he is protected in the same way as if a lease had been granted; he cannot be turned out by six months' notice as a tenant from year to year. He has a right to say, "I have a lease in equity, and you can only re-enter if I have committed such a breach of covenant as would if a lease had been granted have entitled you to re-enter according to the terms of a proper proviso for re-entry." That being so, it appears to me that being a lessee in equity he cannot complain of the exercise of the right of distress merely because the actual parchment has not been signed and sealed.' 156 Cotton LJ was much more circumspect, framing his judgment in terms of what was an appropriate way of preserving each party's rights on an interlocutory basis, though acknowledging that there was (at 17): 'at least such a prima facie case in favour of the Defendant that we ought not to deprive him of the security which the distress gives him without the Plaintiff paying into Court that which will be sufficient security for the Defendant if he is right in his contention …'

157 Lindley LJ, at 17-18, appears to have stated a view that recognises the existence of the right of the landlord to distrain against someone who has possession under a mere agreement for lease by saying that, if a particular construction were adopted of, '… the provisions in the lease… which relate to the payment of rent in advance … the power of distress accordingly would be let in so far as regards the minimum rent.'

158 The remarks of Jessel MR in Walsh v Lonsdale oversimplify the situation which exists when there is a specifically performable agreement for lease: Chan v Cresdon Proprietary Limited (1989) 168 CLR 242 at 250 - 252; Meagher, Gummow & Lehane's Equity: Doctrines and Remedies , 4th ed, para [2-180] - [2-225]. …" 10 The foundation for a Walsh v Lonsdale claim is a contract in respect of which the court will make an order for specific performance. An essential finding, therefore, is that a concluded contract came into existence. As regards the garage, I have already said that none of the plaintiff's affidavits refers to or seeks to establish the making of statements constituting the alleged oral contract of 18 September 2000, with the result that that aspect of the plaintiff's claim must fail. As regards the alleged oral agreement concerning the showroom, the plaintiff relies entirely on a conversation between Mr Sussmann and Mr Dempsey on an unidentified day in mid-March 2000. I am satisfied that a conversation between them took place at that time. There are, however, starkly differing accounts of the conversation. 11 I begin with Mr Sussmann's evidence. He deposes first to conversations with Mr Dempsey in late 1999 in which Mr Dempsey told him that a spa shop at Homebush operated by Paltrin was not doing well and that the earnings from the Narrabeen operation shop were supporting Homebush. In mid-March 2000, Mr Sussmann said he went to the Narrabeen premises to collect the rent and Mr Dempsey handed him a cheque drawn by Spajack. Mr Sussmann says he said, "What is Spajack?" Mr Sussmann's account, as set out in paragraph 6 of his affidavit, continues: "He said: 'As you know, I have been having some money trouble with Paltrin. Basically, I can't afford to keep up the lease on the Homebush shop. It looks like they might wind up Paltrin. I am trying to work out some kind of scheme of arrangement, but if not, Paltrin will have to go into liquidation. It's a $2 company anyway.' I said: 'What about my lease? I've got guarantees from both you and your wife in respect of the lease to Paltrin.' He said: 'That's what I wanted to talk to you about. I formed a new company in January called Spajack. I want to keep the Narrabeen shop, but Spajack will lease it from you instead of Paltrin." I thought about what Dempsey was saying. He had been a good tenant since 1996, and I knew that he was going through a difficult time, both in business and also with a marriage break-up. I said: 'I want the same lease terms as the lease with Paltrin, including the guarantees and the repair and replacement provisions. I need some kind of security.' He said: 'That's fine, all the same terms. But I need it to be on a month to month basis, so that if things do go sour for me I'll be able to walk away.' I then said: 'If this is the arrangement that we will work with, I also want to raise the rent. As you know, I didn't raise the rent on any of the occasions when I was entitled to, but I want to raise it on the CPI scale now. If you can walk on a month's notice, I at least want this.' He said: 'That's fair enough I suppose. Just let me know how much.' We then went on to speak about other issues not directly relevant here." 12 Mr Dempsey agrees that there was a conversation on the occasion referred to by Mr Sussmann, but says that its terms differed very significantly from those deposed to by Mr Sussmann. Mr Dempsey's account is as follows: "I deny that the conversation set out in paragraph 6 is accurate. I say that to some extent the conversation did take place as deposed to. However, I say that I did not say that I would agree to a lease with Spajack on the same terms as the lease with Paltrin. I in fact said was [sic] words to the following effect: 'I will look at a new lease for Spajack only once all the building work I've asked you to do has been done.' Sussmann said words to the following effect: 'Yes, I'm getting quotes for the building to be painted.' I said words to the following effect: 'Well I need it done before the new season, the beginning of October.' Sussmann said words to the following effect: 'I'm going to render the whole building and pull down the awnings at the front. It should happen by October.' I then said words to the following effect: 'O.K. Once that work's been done then we'll look at entering into a lease for Spajack and not before.' Sussmann then said words to the following effect: 'O.K. then, I'll just continue to collect the rent every month before we look at a new lease for Spajack.' I never indicated or said anything to Sussmann which indicated that Spajack had any intention of entering into a new lease with the plaintiff until October and until the building work had been done." 13 Each party contends that its evidence about his conversation should be accepted over the other's. The plaintiff attacks Mr Dempsey's credibility. The defendants attack Mr Sussmann's credibility. I shall say something about credibility presently. For the moment, I simply observe that the case the plaintiff seeks to make is unsupportable even on Mr Sussmann's evidence. 14 According to Mr Sussmann's account, Mr Dempsey's proposal that "Spajack will lease it [ie, the Narrabeen showroom] from you instead of Paltrin" met with a requirement, imposed by Mr Sussmann, that any such new lease be on "the same lease terms as the lease with Paltrin, including the guarantees and the repair and replacement provisions". Mr Dempsey's reply, according to Mr Sussmann, was such as to confirm agreement with that proposition ("That's fine, all the same terms"), but added a qualification ("But I need it to be on a month to month basis …"). Mr Sussmann then said, in effect, that if the tenancy were to be a monthly tenancy, he would want to increase the rent "on the CPI scale now", to which Mr Dempsey agreed, asking Mr Sussmann to let him know what the new rent would be. 15 When the conversation in the terms alleged by Mr Sussmann is said to have occurred, the plaintiff had the benefit of guarantees from both Mr Dempsey and Mrs Dempsey under the written lease previously granted to Paltrin. When, according to his version of events, Mr Sussmann, on behalf of the plaintiff, indicated a willingness to grant a month to month tenancy to Spajack in place of the existing lease to Paltrin (which lease, it was no doubt intended, on that version, would thereby be treated as at an end), he did so on the express footing that the terms of the new lease should all be "the same" (that is, the same as those of Paltrin's lease) and referred specifically to the inclusion of "the guarantees and the repair and replacement provisions". The stipulation that the terms were to be "the same" (allegedly expressly agreed to by Mr Dempsey) was, however, varied later in the conversation to the extent that the tenancy was to be from month to month and that the rent would be increased. 16 The intention of the plaintiff, manifested in the alleged conversation recounted by Mr Sussmann, was that a new lease (by way of tenancy from month to month) would be granted by the plaintiff to Spajack if Mr Dempsey and Mrs Dempsey both guaranteed performance by Spajack thereunder. According to the version of the conversation recounted by Mr Sussmann, it may easily be inferred that Mr Dempsey, for himself, indicated orally a willingness to give the guarantee for which Mr Sussmann stipulated. This was the effect of his words, "That's fine, all the same terms," after Mr Sussmann's reference to "the same lease terms as the lease with Paltrin, including the guarantees …". But, as Mr Sussmann himself said in his affidavit, he well knew at the time of the conversation that Mr Dempsey "was going through a difficult time, both in business and also with a marriage break-up". That knowledge would obviously have displaced any expectation (misguided or otherwise) that Mr Sussmann might otherwise have had that Mr Dempsey was speaking for and was authorised to speak for Mrs Dempsey. Because of Mr Sussmann's stipulation for the "same terms as the lease with Paltrin, including the guarantees …", any agreement arising from the conversation was, at best (from the perspective of the plaintiff and Mr Sussmann), an agreement by the plaintiff to grant and an agreement by Spajack to take a lease from month to month if and when both Mr Dempsey and Mrs Dempsey became bound to guarantee performance by Spajack thereunder, coupled with an agreement by Mr Dempsey to give (and, perhaps, to use reasonable endeavours to persuade Mrs Dempsey to give) a guarantee of performance by Spajack. 17 There is no evidence that Mrs Dempsey ever gave such a guarantee or agreed to do so - indeed, with Mr Dempsey and Mrs Dempsey estranged (and Mr Sussmann being aware of that), there is no basis on which either Mr Sussmann or Mr Dempsey could have expected that Mrs Dempsey would give any guarantee. It follows that an element made essential by Mr Sussmann (on his account) to the taking effect of the plaintiff's agreement to give a new lease and Spajack's agreement to take such a new lease never came into existence and neither side of the agreement between prospective lessor and prospective lessee became due for performance. It is for that reason that I say that the case the plaintiff seeks to make is unsupportable even on Mr Sussmann's evidence. 18 I proceed nevertheless to consider whether Mr Sussmann's evidence about the content of the conversation of mid-March 2000 causes me, in words used in Briginshaw v Briginshaw (1938) 60 CLR 336, to "feel an actual persuasion of its occurrence or existence" so as to produce a "belief in its reality". The plaintiff bears the onus of proving its case and relies entirely on Mr Sussmann's evidence to prove the existence and terms of the oral contract concerning the showroom. I refer first to cross-examination of Mr Sussmann about his version of the crucial conversation. In the following passage, he emphasised the importance he placed on the guarantees: "Q. You wanted a lease and the fact is you say it wasn't acceptable to you because you wanted security, the idea of paying on a, proceeding on a month to month basis? A. Well, security is a bit more than just paying on a month to month basis, you have director guarantees and you have got other thing to rely on if things go bad, damage to your property for example.

Q. You have said though that it was unacceptable, it would have been unacceptable to you to have continued on a month to month basis as I put it to you Mr Dempsey proposed? A. Well, month to month basis without the same terms and conditions of the existing lease is nothing, I would have had nothing but with the understanding that we are operating under the same regime, if you like, as the Paltrin lease I was happy to go on month to month basis on that basis." 19 This passage followed a section of cross-examination in which it was put to Mr Sussmann that Mr Dempsey had said, "All right, we will just continue paying rent month to month". Mr Sussmann denied that, explaining to the court that such an arrangement would not have given him any "security". He said also that he wanted a lease. The message his evidence seeks to convey is that a continuation of the Paltrin monthly tenancy (guaranteed by Mr Dempsey and Mrs Dempsey) - that is, "just continue paying rent month to month" - lacked the "security" involved in the agreement he said was made between the plaintiff and Spajack. 20 Mr Sussmann was asked what he did after the mid-March 2000 conversation. He said he asked Mr Dempsey "to put everything in writing about what was happening with Paltrin, whether it was being wound up or had gone into liquidation and what all of the company details of the new company were". He had said in his affidavit (in a passage not read but cross-examined upon) that he had over the next few months asked Mr Dempsey to arrange for the new agreement to be put in writing. He said he needed "all of the company details" so that a new lease could be prepared, although he did not seem to have any idea how it was going to be prepared. In response to a question as to who was going to draw up the new lease, he said, "We as the parties to the lease", presumably meaning both himself and Mr Dempsey, although the Paltrin lease had been prepared by Mr Sussmann's solicitor (his sister-in-law, Joanne Woodward). Mr Dempsey did not provide the information supposedly requested by Mr Sussmann and Mr Sussmann took no steps to press for it, even though he said he considered it important. Later, however, Mr Sussmann said that he had never intended to reduce the alleged month-to-month agreement with Spajack in writing: "Q. But that deal that you have just said you did, did you intend after that meeting with Mr Dempsey to put that into a written lease document? A. It really - I left it in Mr Dempsey's Court what he was going to do.

Q. Did you have the intention or not? A. I guess I was - no, I guess I was reasonably satisfied with the terms - the terms and conditions that we had agreed to with Spajack. … NEWELL: Q. I'm asking you, Mr Sussman, did you intend for the deal that you did with Mr Dempsey in mid March to be put into a written lease document? A. I guess ultimately no. Something - something inside me says that it should have been formalised but I guess I was appeased by the discussion that we had that Spajack was going to be the lessee and that we had agreed on the terms and conditions and at the time that that was satisfactory for me.

Q. Well, I'm not asking you to justify your thinking. Just tell me what it is. Did you form the intention to get it in writing? A. No, I didn't after that. I gets--

Q. You did not? A. I may have had the intention at one stage but I think I came - more comfortable with the status quo so, no.

Q. I think you you have said yes, no and maybe in that answer.

NEWELL: Q. So you didn't intend for it to be in writing? A. No, not in the end." 21 Still later in his cross-examination, Mr Sussmann said that he had in fact spoken to Joanne Woodward, the solicitor who had prepared the 1996 lease about his supposed agreement with Spajack: "NEWELL: Q. When you weren't really sure what to do in about March 2000 after your conversation with Mr Dempsey, did you speak to your sister-in-law? A. About the lease?

Q. About what to do? A. I do recall vaguely a conversation that we had. I did mention to her that I not received a rent cheque from another company and I think her answer to me was:-

"Well, I'll leave it up to you. You're the best judge. You're running the property. You're managing the rental and the maintenance of the property. If you think it is okay, I'll leave it up to you."

It is up to my judgment, is what she said, as I recall.

Q. If you think it is okay, leave it up to your judgment? A. Yes.

Q. All you told her was that you received another cheque from another company? A. We had come up with a new agreement for a new company to be leasing the premises, a verbal agreement which was in substance a month to month agreement.

Q. Did you say to her, "what should I do about this?"? A. As I said, I had discussed it and I think she said to me leave it that way, that, in my mind, if I felt comfortable with that situation, then continue on that way.

Q. So, she said it was a matter as long as you feel comfortable just keep going along this way? A. That's right.

Q. She did not suggest that she write a letter or that you write a letter? A. No. I asked Mr Dempsey to give me particulars in written form about his company, but we discussed that yesterday, and I never received that, no.

Q. With the intention of giving the particulars to Joanne Woodward? A. Perhaps.

Q. Why do you say perhaps? A. Well, as I said to you, it was a month to month agreement, ongoing. We were going to monitor it as it went along, to see how satisfactory it went. If Mr Dempsey wanted to stay longer, well, then, we could discuss that, and if he wanted to go, well, then, there would be at least a month's notice.

Q. What information were you lacking to prepare a lease that you understood? A. Well, if I was going to perform a lease in writing, I would need the company details, the names of the directors, and ABN numbers and tax file numbers.

HIS HONOUR: We did. I will allow that question and see what comes.

A. I did ask Mr Dempsey for those details and they were not forthcoming.

NEWELL: Q. Well, he just didn't give them to you, is that what you say? A. Apparently not.

Q. Did you tell your sister-in-law about that? A. No.

Q. Did you not mention that you were trying to get the details? A. No.

Q. Why were you trying to get the details if she told you not to worry about doing anything? A. Well, that was a reaction that I had to Mr Dempsey, initially. As I said before, we had come to a verbal agreement, that we would continue along in the same terms but on a month to month basis and see what came of it." 22 It was put to Mr Sussmann that the provision of a Spajack cheque for rent which sparked the conversation in mid-March 2000 occurred in a context where he and Mr Dempsey had agreed that "things would continue exactly as they are on a month to month basis", and that there would be "no change at all" - in other words, that Paltrin would continue to hold over under the expired lease. He replied that his understanding was that "Paltrin had been disposed of". The cross-examination continued: "Q. What do you mean of disposed of? A. Well, Mr Dempsey used to talk to me about how he was going to escape his creditors by winding up his company and for all intents and purposes I believed and whether it's the case or not I'm not sure but Paltrin was either no longer trading or it had may have gone into liquidation, certainly no longer trading.

Q. But the position is, isn't it, that this discussion only occurred because Mr Dempsey handed you a cheque for the rent on the Spajack account? A. That's right.

Q. So Spajack was paying the rent on that day without any agreement according to which it might be the lessee? A. Well, I hadn't been advised prior to that that there was a new company that Mr Dempsey had - had acquired or had set up for the purposes of running his business. I wasn't aware until I was handed the rent cheque. It was then that I queried it." 23 Of course, the fact that, in March 2000 and later, Mr Dempsey gave to Mr Sussmann cheques for rent drawn by Spajack rather than by Paltrin does not, of itself, say anything about the parties' intentions as to creation of any new lease. A tenant who gives a bank cheque for rent does not evince an intention that the landlord should accept the issuer bank as a replacement tenant. A holding company that pays rent to its landlord by means of its wholly owned subsidiary's cheque (which cheque is accepted by the landlord) does not thereby seek to bring about contractual consequences such that the subsidiary is seen to have replaced the holding company as tenant. Payment of a debt by a cheque drawn by a person other than the debtor is prima facie proper tender (Deputy Commissioner of Taxation v Barroleg Pty Ltd (1997) 25 ACSR 167 at p.172 per Young J) but the payee may object at or before the time of receipt of the cheque that it does not constitute legal tender: George v Cluning (1979) 28 ALR 57 at p.62 per Mason J. Payment of rent by means of cheques drawn by Spajack does not in any way imply that Spajack had entered into, or intended to enter into, an agreement to take a lease in place of Paltrin. 24 Mr Sussmann's evidence about the course of action he intended should be taken (and the steps he in fact took) after the alleged oral agreement of mid-March 2000 is quite unconvincing. He says that he took steps to seek from Mr Dempsey particulars about Spajack that he thought would be necessary for the preparation of a lease - "all of the company details". But he apparently had no idea what he was actually going to do with this information if and when he received it. On the one hand, he was expecting Mr Dempsey to arrange the preparation of the new lease; on the other, he thought that "We as the parties to the lease" would prepare it. He held these conflicting expectations in circumstances where his own solicitor had prepared the original lease to Paltrin. When asked whether, if and when Mr Dempsey had given him the requested particulars ("all of the company details"), he would have given them to that solicitor, he replied, "Perhaps" - thus introducing a third possibility, namely, that he would have instructed the solicitor to prepare a new lease. And, in the end, when asked directly whether, after the meeting, he had an intention of putting the alleged agreement into writing, he replied: "I guess I was - no, I guess I was reasonably satisfied with the terms - the terms and conditions that we had agreed to with Spajack."

And later: "I guess ultimately, no …" 25 I do not accept that Mr Sussmann ever had an intention of having the alleged agreement (or new lease) with Spajack put into written form. And I infer from this the strong likelihood that there was, in reality, no agreement that could have been put into written form. 26 Nor, I might say, does Mr Sussmann's evidence as to the formation of the alleged agreement withstand scrutiny from the point of view of objective logic. Paltrin was the tenant under the expired 1996 lease. It was holding over on a monthly basis. Performance by Paltrin was guaranteed by Mr Dempsey and Mrs Dempsey. Had Paltrin defaulted in the payment of rent under the holding over, the plaintiff could have put an end to that holding over quite promptly and, if Paltrin was under financial stress, the plaintiff could have pursued both Mr Dempsey and Mrs Dempsey for the deficiency in rent. According to Mr Sussmann, the oral agreement merely substituted Spajack for Paltrin. The new tenancy was a monthly tenancy as the old, at that point, had been and, on the version for which the plaintiff contends on the basis of Mr Sussmann's evidence, the same ability to terminate on short notice and to pursue both Mr Dempsey and Mrs Dempsey for any deficiency in rent pertained. So what was the rationale for the new arrangement? Mr Sussmann's affidavit evidence was that Mr Dempsey had told him that he might have to wind up Paltrin because of "some money trouble with Paltrin". In cross-examination, he testified to a belief that Paltrin had been "disposed of" and that "it was either no longer trading or it had may have gone into liquidation, certainly no longer trading" [emphasis added]. The alleged statement by Mr Dempsey that he might have to wind up Paltrin was thus, by some unexplained means, the source of a belief on the part of Mr Sussmann that that company had been "disposed of" or "was no longer trading" or "had … gone into liquidation" or "may have gone into liquidation". 27 Mr Sussmann's own evidence of what Mr Dempsey told him about the situation of Paltrin could not have produced in Mr Sussmann's mind the belief he reported on that matter in cross-examination. But even if Paltrin was, as Mr Dempsey said, in financial difficulties, that would by no means at all have led to any well based belief on Mr Sussmann's part that a new agreement was (or was to be) made with Spajack which had begun paying the rent. The Paltrin tenancy was terminable on a month's notice and, if Spajack stopped paying the rent, the plaintiff had recourse against Mr Dempsey and Mrs Dempsey. 28 From Spajack's perspective, the agreement alleged by the plaintiff on the basis of Mr Sussmann's evidence would have made very little commercial sense indeed. Spajack's attitude is much more likely to have been as represented by Mr Dempsey in his version of the conversation of mid-March 2000, that is, that, if there was going to be a new lease, it should be a lease for a meaningful term and a lever, from his point of view, to extract something from the plaintiff by way of improvements to the premises; also that there was no real advantage to Spajack in entering into a monthly tenancy when things could simply be left informally on that basis under the existing arrangement. And how Spajack, through Mr Dempsey, could be thought to have committed itself to even a monthly tenancy under an agreement requiring a guarantee by Mrs Dempsey when she and Mr Dempsey were in the process of parting company and going their separate ways is quite unexplained - particularly since, as appears from Mr Dempsey's evidence, the rationale for his introducing Spajack into his business affairs was that a company in which Mrs Dempsey was not involved should come to take the place of one in which she was. That quite understandable objective might have been promoted by a new agreement involving Spajack as tenant but would have been totally undermined by the inclusion of Mrs Dempsey as a guarantor which the plaintiff says was a central element created by the crucial conversation. 29 In my judgment, the evidence of Mr Sussmann about the conversation in mid-March 2000 is so affected by unexplained inconsistencies, as well as significant elements of improbability at odds with the rational consequences of surrounding circumstances, that it cannot be accepted as reliable. 30 In relation to the showroom, the plaintiff has failed to make out the first essential of its Walsh v Lonsdale claim, being the existence of a concluded oral contract. This is because, first, I do not accept the version of the crucial conversation of mid-March 2000 deposed to by Mr Sussmann and, second (and in any event), his evidence about the conversation, even if accepted, would not have permitted a finding that the oral contract alleged had been formed. As regards the garage, the claim based on an oral lease fails because of the entire absence of evidence of any relevant conversation. 31 These conclusions make it unnecessary to consider the other matters canvassed before me. The plaintiff's claims are dismissed with costs. **********

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.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (40 paragraphs)

Parties

Cases Cited (4)