Gollin & Co Ltd v Karenlee Nominees Pty Ltd

Gollin & Co Ltd v Karenlee Nominees Pty Ltd - [1983] HCA 38 - HCA 1981 case summary — Zoe

[25]

If the above facts stood alone, there would probably be little difficulty in concluding either that an agreement should be inferred between the parties to the effect that the rent review clause would not be applied or that the lessors had, by their conduct, represented to Gollin that they agreed that the rent would remain unchanged for the last five years of the term. They do not, however, stand alone. To the contrary, there is a strong body of evidence militating against such a conclusion. Thus, on 25 October 1977, the lessors' real estate agents had written to Gollin giving notice that "any monies received re this property from 1 October, 1977 shall be accepted without prejudice to rental increase due on 1 October, 1977, which is yet to be determined". That notice was never countermanded or withdrawn. In a letter of 13 December 1977 which was written to the lessors in the context of the discussions which were then proceeding, Gollin expressly affirmed its "understanding that rent review under the Lease is to be agreed or determined in the manner provided for in cl. III(vii) of the Lease". The draft letter of 1 March 1978, which set out the proposal that any increase in rent should remain in abeyance on terms which were not accepted by Gollin, expressly records the lessors' claim that the annual rent should have been $240,000; the proposed period of abeyance was limited until the time when "the Lessors [sic] could re-let" the vacant parts of the premises. The Baillieu Allard valuation, which was obtained by Gollin in May 1978, stated that the valuers' understanding was that the parties to the lease had failed to agree on a revised rent and that it was "in connection with finalising the rent review in accordance with the lease terms" that the valuation was required. Perhaps most important is the evidence of the then General Manager of the Gollin group of companies (Mr. Foster) upon which the members of the Full Court placed particular reliance. His evidence in chief included the following:

[32]

The provisions of cl. III(vii) cannot be treated as having been solely for the benefit of the lessors. They constituted the only agreed procedure for ascertaining a rent for the last five years of the lease. If the application of that procedure were to result in the minimum rent of $144,000, that amount would represent the determination of rent by that procedure as distinct from an amount nominated in default of it. In these circumstances, even if the lease had contained a provision expressly requiring Gollin and the lessors respectively to appoint a valuer or to activate the rent review procedure within a specific time, the performance of that obligation within that particular time could not, without more, have properly been seen either as a condition of the applicability of cl. III(vii) or as being of the essence of the contract (see, generally, United Scientific Holdings Ltd. v. Burnley Borough Council [5] ). The position is even clearer in the present case where there was no express obligation and no express provision as to time. It is, as has been seen, difficult enough to imply in the lease an unqualified requirement that each party appoint a valuer or obtain a valuation or otherwise activate the rent review procedure within a reasonable time of the commencement of the fourth year of the term without agreement having been reached on the rent for the last five years. It is plainly impossible to imply a further provision that that implied time for the performance of that implied obligation was of the essence of the contract or that the performance of that implied obligation within that implied time was a condition of the operation of the only clause of the contract which made provision as to the amount of rent to be paid for the last five years of the term. It follows that any delay of the lessors in invoking the provisions of cl. III(vii) and in appointing a valuer did not, in the circumstances, involve any breach of an essential term of the contract or a failure to comply with the requirements of a condition of the operation of cl. III(vii). If it had involved such a breach, a serious question would have arisen whether, in circumstances where Gollin had not purported to rescind the contract, the consequence of the breach was that the lessors lost the right to invoke the procedure which the parties had agreed should be applied to determine the annual rent for the last five years of the term.

[39]

it seems to me that there was no effective nomination till the notice was given to the other party. For, though one party might, on hearing who the referee of the other party was, be satisfied with the referee whom he had selected for himself, yet the meaning of the agreement here must have been to include all cases. Each was to know who the referee of the other was. Otherwise, each might have nominated the same person, or one might have nominated a person to whom the other had a valid objection. Wightman J.'s judgment read [11] : I am of the same opinion. The agreement could hardly mean that each party was to name, without communicating to the other party, his own referee. If so, there would be no opportunity of appointing a new referee in case the one before selected appeared objectionable, nor indeed any opportunity of knowing that an appointment had taken place. Lord Denman C.J. said [11] : Clearly, to bind one party with respect to the opposite party, something should take place authorising the one to consider that the other has made his nomination. In successive editions of Russell on Arbitration (see, e.g., 20th ed. (1982), p. 123), Tew v. Harris has been accepted as establishing that an appointment of an arbitrator by a party is "not complete without communication thereof to the other party". (See, also, Thomas v. Fredricks [12] (a case involving the appointment of valuers); Cox v. Johnson [13] ). In Tradax Export S.A. v. Volkswagenwerk A.G. [14] , Lord Denning M.R. and Salmon L.J. expressed the view that three things were necessary to constitute an effective appointment of an arbitrator under a clause in a charter-party which stated that all disputes were to be referred to the arbitration of two arbitrators, one appointed by each party. In the words of Lord Denning M.R. [15] : First, it is necessary to tell the other side. That is plain from Tew v. Harris . Second, it is necessary to tell the appointee himself. That is obvious because he often has to start acting at once. Third, it is necessary that he should be willing to act and have intimated his willingness to accept the appointment. 1. (1847) 11 Q.B. 7 [116 E.R. 376]. 2. (1847) 11 Q.B., at p. 11 [116 E.R., at p. 378]. 3. (1847) 11 Q.B., at p. 12 [116 E.R., at p. 378]. 4. (1847) 11 Q.B., at p. 12 [116 E.R., at p. 378]. 5. (1847) 10 Q.B. 775 [116 E.R. 294]. 6. (1914) 14 S.R. (N.S.W.) 240, at p. 250. 7. [1970] 1 Q.B., at pp. 544, 545-546. 8. [1970] 1 Q.B., at p. 544.

At a glance

Court

Decision date

Before

Source

Judgment (45 paragraphs)

Parties