Inndeavor Apartment Wolli Creek Pty Ltd v Maroun Pty Ltd

JUDGMENT

1. WARD P: I agree with Stern JA.
2. STERN JA: This appeal primarily raises issues as to the proper construction of one agreement, which I will describe as the Handover Agreement, dated 5 October 2021. Pursuant to the Handover Agreement, Inndeavor Apartment Wolli Creek Pty Ltd ("Inndeavor", the first appellant) agreed, amongst other things, to "hand back" 109 apartments at a property variously described as having three addresses, being 4 and 6 Magdalene Terrace, and 6 Mount Olympus Boulevard, Wolli Creek, NSW 2205 (the "Property"). At the time, Inndeavor was leasing those apartments from Maroun Pty Ltd ("Maroun", the first respondent) and TQM Design & Construct Pty Ltd ("TQM", the second respondent), as named landlords on the relevant residential tenancy agreements (the "Leases"). Inndeavor, which conducted a business of providing leasing services in the southern suburbs of Sydney, subleased the apartments to international students and "others from overseas". As Inndeavor's counsel explained to the primary judge, Inndeavor thus took on the risk of paying rent under the Leases, in the expectation that it would make a profit on the subleases.
3. Inndeavor's central contention on appeal is that the primary judge erred in not finding that the Handover Agreement constituted an accord, which Inndeavor subsequently satisfied, which effectively released Inndeavor from its obligations to both Maroun and TQM under the Leases to pay rental arrears in full. This release was subject to Inndeavor complying with its obligations under the Handover Agreement. To the extent that these obligations included the payment of arrears of rent owing under the Leases, Inndeavor contends that it was not required, under the Handover Agreement, to pay the full amount owing under the Leases, but was instead obliged only to pay a lesser sum of $45,142.86, which it paid on 9 November 2021. Inndeavor says that that lesser sum represents amounts outstanding as at 3 November 2021 (when the Handover Agreement took effect) under temporary rent reduction arrangements ("Rent Reduction Arrangements") agreed between Inndeavor, Maroun and TQM from 2020 when Inndeavor's subletting business suffered a downturn due to the COVID-19 pandemic. For convenience I will describe the sum of $45,142.86 as the "Inndeavor Reduced Arrears Figure".
4. Before the primary judge it was conceded by Inndeavor that, but for what it contended was the accord constituted or evidenced by the Handover Agreement, it would have owed rental arrears of $1,313,710 under the Leases ("Rental Arrears"). That was the sum claimed by Maroun and TQM by way of cross-claim against Inndeavor. As necessarily follows from this, it was, and is, no part of Inndeavor's case that the Rent Reduction Arrangements made during the COVID-19 pandemic operated to vary Inndeavor's obligation to pay the Rental Arrears. The issue before the primary judge, and before this Court on appeal, is whether the effect of the Handover Agreement was that Inndeavor was released from its obligation to pay the Rental Arrears and, relevantly, was required only to pay the Inndeavor Reduced Arrears Figure.
5. It was also accepted by Maroun and TQM before the primary judge that Inndeavor was entitled to be repaid $319,400 which it had paid by way of rental bonds under the Leases ("Bond Repayment"). This was the amount sought by Inndeavor in its claim against Maroun and TQM, ultimately advanced through its Further Amended Statement of Claim ("FASOC") filed on 10 November 2023.
6. By an ex tempore judgment on 6 December 2023, the fourth day of the trial, the primary judge found that TQM was not bound by the Handover Agreement: "… in which case the defence of accord and satisfaction said to arise from that document could not succeed against it."
7. The primary judge concluded that, in those circumstances, Inndeavor could not resist TQM's claim to be paid the Rental Arrears subject only to setting off the Bond Repayment. Beyond finding that it did not relieve Inndeavor from its obligation to pay the Rental Arrears to TQM, the primary judge did not consider the proper construction of the Handover Agreement. The primary judge entered judgment for TQM on the cross-claim for $1,117,653, being $1,313,710 (the amount of the Rental Arrears) less $319,400 (the Bond Repayment) plus pre-judgment interest. The primary judge invited counsel for Maroun to take instructions whether Maroun wished to pursue its cross-claim in those circumstances. Maroun submitted that it would withdraw its cross-claim and the primary judge granted leave for Maroun to do so.
8. On appeal, Inndeavor contends that the primary judge erred: 1. in finding that TQM was not a party to the Handover Agreement (appeal ground 1); 2. in finding that TQM was severally entitled to the debts constituted by the arrears owing under the Leases such that a release by Maroun under the Handover Agreement would not release Inndeavor from its liability to pay the Rental Arrears to TQM (appeal ground 2); and 3. in not finding that the Handover Agreement constituted, or was evidence of, an accord which was satisfied by the payment of the Inndeavor Reduced Arrears Figure on 9 November 2021, releasing Inndeavor from its obligation to pay the Rental Arrears to either Maroun or TQM (appeal grounds 3 and 4).
9. Irrespective of whether TQM was a party to, or could have been released by, the Handover Agreement, Inndeavor cannot succeed in its appeal unless the effect of the Handover Agreement was that Inndeavor was released from an obligation to pay the full amount of the Rental Arrears. Unless it was, the payment of the Inndeavor Reduced Arrears Figure (i.e., of $45,142.86) could not constitute "satisfaction". Only payment of the Rental Arrears of $1,313,710 (less the amount of the Bond Repayment) could amount to satisfaction of the accord. Appeal grounds 3 and 4, and the appeal as a whole, turn on this issue. As will become apparent, I have found that the Handover Agreement does not have such effect and that Inndeavor's appeal must therefore be dismissed.
10. In these circumstances, consistent with the guidance of the High Court in Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [7]-[8] (Kiefel CJ, Gageler and Keane JJ) and [101] (Bell, Nettle, Gordon and Edelman JJ) this Court should not make findings on the further issues arising from the appeal grounds unless the overall efficiency of the system of justice will likely be better served by this Court determining those further substantive issues raised on the appeal. Given the possibility of an application for special leave to appeal, I have thus included, albeit briefly, my findings on the further issues arising.

Factual Background

1. Before turning to the critical question of construction, it is convenient to identify, briefly, the background to the Handover Agreement.

The Leases and problems caused by the COVID-19 pandemic

1. Lance Li is the director of Inndeavor. Mark Taouk is a director of, and holds a 50% shareholding in, Maroun. He also holds a 50% shareholding in TQM. Maroun Taouk is the sole director of, and holds the other 50% shareholding in, TQM. Both Mr Li and Mark Taouk provided affidavits and gave oral evidence before the primary judge.
2. On 31 August 2018, Inndeavor and Century 21 Wentworth Real Estate - Sydney Pty Ltd ("Century 21") entered into a document styled as an "Agreement to Lease". It was common ground that Century 21 was the leasing agent for both Maroun and TQM. Clause 1 of the Agreement to Lease relevantly provided: "1. Background (a) Century 21 is the authorised leasing agent of Maroun Constructions Pty Ltd [which should read, Maroun Pty Ltd] the builder owner of 108 residential apartments to be constructed and known as the 'Eden Residence' located on 4 Magdalene Terrace, Wolli Creek (the Building). (b) Inndeavor has agreed to accept a residential tenancy lease for various apartments of the Building from Century 21 with the right to sub-lease to sub-tenants (the Residential Lease). (c) The Residential Lease will be granted in accordance with the terms and conditions of this Deed." (Emphasis in original)
3. By cl 4, Century 21 warranted that it was the leasing agent of "Maroun". By cl 2(a) of the Agreement to Lease, through Century 21 as agent, Maroun agreed to lease 109 apartments within the Property to Inndeavor. The lease term was 48 months (with an option to renew for a further 48 months) and the bond payable was "4 weeks rent". The parties agreed that each residential lease to be granted pursuant to the Agreement to Lease would incorporate its terms, as applicable. Between around January and March 2019, Inndeavor entered into 41 residential tenancy agreements, with the remaining residential tenancy agreements to be governed by the Agreement to Lease (for convenience, I will refer to all 109 of these agreements as the Leases). It was common ground that the Leases were entered into between Maroun and TQM on the one hand, and Inndeavor on the other.
4. Whilst Maroun and TQM were named as landlords on the Leases, in fact it was Maroun (as trustee for a trust holding company) alone who was the registered proprietor of the Property. TQM had been contracted to construct the Property. The total weekly rent for the 109 apartments was $79,850. Examples of the Leases were in evidence. These showed that under the Leases, rent was payable weekly in advance and was to be paid to the Landlord's agent (then Century 21). It was common ground that rent was payable to Maroun and TQM under the Leases. The Leases were for a 48 month term, with an option to renew for a further 48 months. The example Leases included in the appeal books all included an agreement to the effect that the tenant would pay a break fee if the lease was ended before the end of the 48 month fixed term (the "Break Fee Clause"). Curiously, the Break Fee Clause omitted to specify the sum payable but it was not contended that the Break Fee Clause was ineffective to impose some fee.
5. Inndeavor then advanced $319,400 to Century 21 as rental bonds due under the Leases.
6. From May 2019, the leasing of the apartments in the Property was managed internally by Maroun and TQM, as Century 21 ceased acting as their agent.
7. From around December 2019, Inndeavor was under financial pressure due to an increasing number of apartment vacancies. Mr Li was concerned about Inndeavor's ability to make its weekly rental payment. A one-off, one week rental reduction of $20,000 was agreed between Mr Li and Mark Taouk. Inndeavor's financial difficulties continued, however, as a result of the closure of Australia's borders to mainland China in response to the COVID-19 pandemic. There were a number of weeks when Inndeavor did not pay the full amount of rent under the Leases.
8. There followed a number of Rent Reduction Arrangements in 2020 and 2021. Whilst there were disagreements as between the evidence of Mark Taouk and Mr Li as to the terms of these temporary arrangements, ultimately the parties agreed that Rental Arrears in the sum of $1,313,710 were payable as at 3 November 2021 (subject to the accord and satisfaction). There was, however, no agreement as between the evidence of Mark Taouk and Mr Li as to what exactly was agreed by way of temporary rent reduction, and in particular, whether some or all of the Rent Reduction Arrangements were subject to Inndeavor fully complying with their terms which, on many occasions, Inndeavor did not when it failed to pay the temporarily reduced rent on time or paid less than the agreed temporarily reduced rent. This means that there is no agreement between the parties that the Inndeavor Reduced Arrears Figure accurately reflects the amount owing by Inndeavor under the Rent Reduction Arrangements in the period up to 3 November 2021 when the Handover Agreement took effect.

Negotiation of a "hand back" of the apartments

1. Negotiation of an agreement for Inndeavor to "hand back" the apartments at the Property commenced in May 2021. On 26 May 2021 Mr Li sent to Brian Yazbeck (Portfolio Development Manager at TQM), Mark and Maroun Taouk what Mr Li described as "the confirmation email for returning the 109" apartments at the Property, noting that "we have finally reached a deal." Mr Yazbeck, however, sent comments by email on 27 May 2021, which made it plain that no agreement had in fact been reached.
2. Inndeavor sought, in oral submissions on appeal, to rely upon the fact that Mr Li's email of 26 May 2021 suggested that the parties had agreed that "the arrears of the rent difference to $66K/week from the past several weeks will be deducted from the bond" and did not otherwise refer to Inndeavor paying arrears, and that Mr Yazbeck made no comment on this suggestion in his email of 27 May 2021. However, as no agreement was reached in May 2021, and a different agreement was reached by way of the Handover Agreement on 5 October 2021, the emails in May 2021 do not bear on the issues in the appeal.
3. Negotiations did not resume until August 2021.

The Handover Agreement

1. The Handover Agreement is dated 5 October 2021. It was signed on this date by Mr Li, on behalf of Inndeavor and its related company, Future Pacific Realty Pty Ltd ("Future Pacific", the second appellant) who was to take on the role of managing agent for the apartments at the Property after they were handed back to Maroun. On 6 October 2021, the Handover Agreement was signed by Mark Taouk, who was described as "Authorised representative of Maroun Pty Ltd." There is no mention of TQM in the Handover Agreement. The Handover Agreement was emailed to Mr Li for signing on 5 October 2021 by Cherry Dawkins (Property Portfolio Manager at TQM) with Mark Taouk copied. Ms Dawkins and Mark Taouk's email addresses included the domain "@tqmdc.com.au". It thus appears that the Handover Agreement was prepared by someone at either TQM or Maroun, and was sent by TQM to Mr Li. It was common ground that it was not prepared by lawyers.
2. For the purposes of this appeal, the key terms of the Handover Agreement are as follows: "1. Inndeavor agrees to hand back all 109 apartments as Future Pacific Realty will become the managing agency of all 109 apartments at an agreed management fee of Future Pacific will be paid, 1 week's letting fee for every new tenancy and $150 + GST for every lease renewal. Note the tenant application and lease renewal will be upon the owner's approval. The lease term with tenants minimum 26 weeks. 2. In return for the low management fee, the large caged storage area of basement 4 (B4) continues to be available to Inndeavor to store their furniture at no additional cost. 3. Inndeavor will hand over the current tenants at 4 Magdalene Terrace Wolli Creek to Future Pacific Realty as the managing agent and not move or transfer the tenants to other locations. Inndeavor, No Fail [another company associated with Mr Li] and Future Pacific agree to this as a non-compete clause. … 4. In return, there will be no break lease fee or equivalent penalty charged to Inndeavor. 5. The balance of the arrears will be deducted from the bond after all individual apartment bonds have been paid to Rental Bonds Online. Should the bond not be enough to cover, the arrears will still be payable by yourself as the guarantor. For the rent payment instructions, we will provide a detailed spreadsheet for details after routine inspection. … 8. Maroun Pty Ltd will refund six apartment bonds back to Future Pacific Realty once ten apartment bonds have been lodged with Fair Trading by Future Pacific, this will continue until 109 apartments have been lodged. Future Pacific Realty will get the rest of the bond refunded once the following items have been finalized. a. The balance of the rent is transferred to the Future Pacific Realty Trust account and is ready to transfer to Maroun Pty Ltd. b. All files are transferred to Future Pacific Realty and copies of everything provided to Maroun Pty Ltd. c. Repairs for each apartment as specified. d. No outstanding arrears. … 15. Note: If the bond held by Maroun Pty Ltd, does not cover the return of tenants' bonds to the RBO, arrears, damage, etc., Lance/Inndeavor/and any other guarantor will be liable for the due balance."
3. As is common ground, under the Handover Agreement Inndeavor remained obliged to pay "arrears", a word which was not defined in the Handover Agreement. Inndeavor says the reference to "arrears" in the Handover Agreement, should be construed as a reference to the amounts owing under the Rent Reduction Arrangements, not the Rental Arrears. Thus, it says, it was only obliged under the Handover Agreement to pay the Inndeavor Reduced Arrears Figure, of $45,142.86, which Inndeavor contends is the quantification of the amount owing under the Rent Reduction Arrangements rather than the Rental Arrears owing as at 3 November 2021, agreed in the sum of $1,313,710. On appeal, Senior Counsel for Inndeavor submitted: "So the way we put the construction point is that the balance of arrears in context was known to be the shortfall on the reduced rents, and then that's quantified on 8 November, and it's paid on the 9th. So although the figure is not in the agreement, there was agreement that how it was to be worked out, and it was worked out."
4. By contrast, Maroun and TQM say that Inndeavor was obliged under the Handover Agreement to pay the Rental Arrears in full.

Was there any release of Inndeavor's obligation to pay the Rental Arrears?

1. As I have already indicated, Inndeavor's appeal cannot succeed unless its obligation under the Leases to pay the Rental Arrears was somehow released by an accord, which it satisfied, constituted or evidenced by the Handover Agreement. This, in turn, requires that the word "arrears", where it appears in the Handover Agreement, be construed as referring only to the amount owing under the Rent Reduction Arrangements (and not the Rental Arrears). Inndeavor contends that the circumstances surrounding the entry into the Handover Agreement support its proposed construction of the Handover Agreement. In particular, Inndeavor points to: 1. the longstanding Rent Reduction Arrangements; 2. references to "arrears" as meaning amounts outstanding under the Rent Reduction Arrangements in an email from Mr Yazbeck to Mr Li of 6 May 2021, in the lead up to the May 2021 "hand back" negotiations; 3. the terms of the 12 May 2021 email from Mr Yazbeck to Mr Li negotiating the terms of a proposed handover, which required only that the "current arrears" be paid, noting these were $32,000; and 4. the subsequent reference to "outstanding rent payment of $45,142.86" in the email of 8 November 2021 from Ms Dawkins to Mr Li.
2. Maroun and TQM contend that the Handover Agreement contains no release of the obligation of Inndeavor to pay the Rental Arrears. They contend that Inndeavor's obligation to pay the "balance of the arrears" in the Handover Agreement means what it says, namely, the Rental Arrears owing.
3. I would reject Inndeavor's contention that arrears in the Handover Agreement means only amounts owing under the Rent Reduction Arrangements for the following reasons.
4. First, as already set out, the parties are agreed that the arrears for which Inndeavor was then liable were in fact the Rental Arrears and not the amounts owing under the Rent Reduction Arrangements. Objectively, therefore, the parties would have intended the word "arrears" to mean the Rental Arrears, being the amounts actually owing under the Leases at that time.
5. Second, there is nothing in the Handover Agreement that suggests that "arrears" should mean anything other than the amounts actually owing under the Leases. Unlike, for example, in the May 2021 negotiations, the word "arrears" is not qualified to indicate that it was intended to mean something other than amounts owing under the Leases. Objectively, and notwithstanding that this is not a document drafted by lawyers, it would be expected that there would be some language used in the Handover Agreement to suggest this if the parties intended something less than the usual meaning of "arrears" to apply.
6. Third, from cl 5 of the Handover Agreement, and to some extent cl 15, it is clear that, if the Bond Repayment was not sufficient to cover the arrears, the arrears would still be payable by Mr Li and Inndeavor as guarantors. This is consistent with the parties, objectively, understanding that it was possible that a sum in excess of the $319,400 Bond Repayment figure was owing by way of "arrears" at that time. It appears, however, that on Inndeavor's case the amount owing at that time under the Rent Reduction Arrangements would have been significantly less than $319,400. That provides some, limited, support for Maroun and TQM's contention as to construction.
7. Fourth, matters after 5 October 2021 cannot be prayed in aid of construction of the Handover Agreement: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [26]; JD Heydon, Heydon on Contract (Thomson Reuters, 2019) at [9.1690]. In any event, the correspondence in November 2021 is equally consistent with either construction, as it does not go to the question of arrears. It is instead focussed upon the ongoing obligations of Inndeavor to make rental payments each week as they fell due.
8. In the circumstances, I would reject Inndeavor's key contention, upon which appeal grounds 3 and 4 depend, that the Handover Agreement constituted or evidenced a release of the obligation of Inndeavor to pay the Rental Arrears. In these circumstances, Inndeavor's appeal must be dismissed.
9. Given this, as already set out, I will only consider the remaining issues briefly.

Has Inndeavor proved that the amount owing under the Rent Reduction Arrangements at 3 November 2021 was $45,142.86?

1. Consideration of this issue requires some focus upon the contemporaneous documentation in the period between 5 October and 9 November 2021, being the date the Handover Agreement was executed until the payment of the Inndeavor Reduced Arrears Figure.
2. Consistent with cl 1 of the Handover Agreement, an exclusive management agreement was entered into between Maroun (as principal), but not TQM, and Future Pacific (as agent) on 11 October 2021 ("Exclusive Management Agreement").
3. Following 5 October 2021 there were also communications between Inndeavor, and representatives of Maroun and TQM about arrangements to implement the Handover Agreement. On 25 October 2021 Ms Dawkins of TQM emailed Mr Li, copied to Mark Taouk, requesting that steps be put in place to commence the transition procedure, presumably under the Handover Agreement. This email concluded: "Lastly note that from now on, you must have our consent prior to approving any applications for vacant properties during the transition procedure. If you wish to follow the old agreement for this matter we're happy for you to do so, however keep in mind, the weekly rent will revert back to $79,980 from $66,000."
4. On 4 November 2021 Mr Yazbeck sent an email to Mr Li, copied to Mark Taouk and Ms Dawkins, saying: "Following your telephone conversation with Mark, you have agreed to pay your missed rental arrears today. Please forward a remittance once the payment has been finalized."
5. Mr Li responded to this email by emailing Mark Taouk, copying Ms Dawkins and Mr Yazbeck, later on 4 November 2021: "You will receive a $66k rent payment today. It is not a rent arrear, it is the rent we collected on behalf of TQM as per the agency agreement effected on 11/10/2021. The rent arrear has been agreed to be covered by the bond. We have been reaching out by email and phone to inform you that we are calculating the rent we collected since 11/10/2021 and we will transfer the surplus if we underpaid and deduct it from your future rent we overpaid."
6. Inndeavor paid the $66,000 on 4 November 2021.
7. Inndeavor seeks to rely upon this payment as constituting overpayment of rent in the sum of $18,857.14 for the period between 28 October 2021 up to and including 2 November 2021, on the basis that that was a period of five, not the full seven, days for which a reduced rent of $66,000 had been temporarily agreed (with the $18,857.14, being 2/7 of $66,000, thus representing two days of overpaid rent). This characterisation is critical to Inndeavor's contention that the amount owing under the Reduced Rental Arrangements is $45,142.86. This is because Inndeavor seeks to support the figure of $45,142.86 as the amount owing under the Reduced Rental Arrangements on the following basis: 1. First, Inndeavor contends that as at 21 October 2021, the amount owing under the Reduced Rental Arrangements was $64,000. Maroun and TQM do not accept that this is accurate. They point to the repeated non-compliance of Inndeavor with the terms of the various Reduced Rental Arrangements, which they say had the consequence that for multiple weeks the amount owing even under those arrangements reverted to the full weekly rental figure. Having regard to Mr Li's agreement with Mark Taouk's evidence as to this, at least as regards the temporary rent reduction arrangement agreed on 28 July 2020, and to an email from Mark Taouk to Mr Li on 3 August 2020 setting out a reduced rental arrangement but adding that this was "only valid if there is no default on the agreement", I do not accept that the $64,000 figure accurately reflects the arrears owing under the Reduced Rental Arrangements as at 21 October 2021. 2. Second, Inndeavor contends that the payment of $66,000 which it made on 4 November 2021 constituted an overpayment of $18,857.14. For the reasons set out above, I would reject this characterisation. There is no contemporaneous documentation to confirm this characterisation. Nor is there any explanation in the evidence as to why Inndeavor would have overpaid rent for this period. Further, it is apparent from the two emails of 4 November 2021 set out above that this payment of $66,000 was characterised by Mr Li as a payment collected by Inndeavor on account of rent for the period after the Exclusive Management Agreement was entered into. It thus appears that the $66,000 was treated by Inndeavor as a payment under the Exclusive Management Agreement and not as payment of arrears which it owed under the Leases. It appears from Mr Li's email of 4 November 2021 that he had been operating on the basis that Inndeavor (or probably more accurately Future Pacific) had been collecting rent on behalf of Maroun from 11 October 2021 when the Exclusive Management Agreement was signed. There is nothing to suggest that it was agreed as between Inndeavor and TQM (either on 4 November 2021 when it was paid, or subsequently when a handover date of 3 November 2021 was agreed) to treat the $66,000 as if it were instead payment of five days rent from Inndeavor.
8. On 8 November 2021, Ms Dawkins emailed Mr Li, copying Mohammed Miner (Property Manager at Inndeavor) and Mark Taouk, saying: "As discussed, we're happy to move to the next step if you put the following items in motion today: 1. Arrange the outstanding rent payment of $45142.86 to our account from Inndeavor as you only paid up to 28/10/2021. 2. Arrange the two weeks tenants' rent you collected as an agent to our account on 9/11/2021, for the period of 03/11-10/11/2021, and continually transfer the funds to us every fortnightly." (Emphasis in original).
9. As is apparent from this email, Ms Dawkins was treating the payment of $45,142.86 as an outstanding rent payment for the period from 28 October 2021 up to and including 2 November 2021. There is nothing to indicate how she calculated this figure to be $45,142.86 (noting that 5/7 of the $66,000 reduced rent is $47,142.86). It may be she made a calculation error, or a typographical error. Ultimately it does not matter. What matters is that the documentary evidence does not support Inndeavor's contention that the figure of $45,142.86 was intended by Maroun to reflect the amount owing by Inndeavor as at 3 November 2021 under the Rent Reduction Arrangements.
10. On 9 November 2021, Ms Dawkins emailed Mr Miner, querying whether Inndeavor had arranged "the outstanding rent payment of $45142.86." Ms Dawkins then added the following clarifying message: "… the fortnight payment you are planning to arrange on 17/11/2021, will not be for the period 03/11/2021 - 16/11/2021 as you will be the managing agent, not a tenant. Therefore, it should be different payment dates as each tenant pays rent differently … Moving forward, please transfer whatever you receive from multiple tenants to us on 16/11/2021, and the next payment after this should be on 30/11/2021."
11. The sum of $45,142.86 was paid by Inndeavor on 9 November 2021. Shortly thereafter on 10 November 2021, Ms Dawkins emailed Mr Li and Mr Miner, copying Mark Taouk, and thanked Inndeavor for arranging the "outstanding rent payment … and for confirming the future payment frequency."
12. Whilst the characterisation of the $45,142.86 as the shortfall in the rent owing under the temporary rent reduction arrangement was not addressed in Mr Li's affidavit evidence, his oral evidence was that this amount "is the final amount that is accumulated from all of the previous payments", and that "[t]his is the final amount that accumulated from all previous rent arrears."
13. The respondents' position is that it was in no way agreed by the parties that this $45,142.86 amount would constitute the total Rental Arrears payable by Inndeavor. When it was put to Mark Taouk that Ms Dawkins was chasing the "arrears referable to the 5 October agreement" in the emails of 8 and 9 November 2012 (above at [43]-[46]), Mark Taouk's oral evidence was that he was "not sure." The topic was not pursued further in cross-examination. It was not put to Mark Taouk in cross-examination that he had ever agreed that the amount owing under the Rent Reduction Arrangements was $45,142.86, nor that he had ever agreed that the sum sought on 9 November 2021 was agreed to be the amount owing under the Rent Reduction Arrangements. Nor was there any evidence from Mr Li to that effect.
14. On balance, the evidence does not meet the threshold of showing, on the balance of probabilities, that the $45,142.86 paid on 9 November 2021 was the amount then owing under the Rent Reduction Arrangements. There is some superficial attraction in Inndeavor's calculations seeking to establish this. However, the factual premise for those calculations is lacking in circumstances where, under the Rent Reduction Arrangements, Maroun and TQM expressly required that the full amount of rent be paid in the event of any default in the Rent Reduction Arrangements such that even under those arrangements it could not be said that the reduced weekly figure was all that was owing. Moreover, there is no contemporaneous document that supports Inndeavor's characterisation of this sum as the balance due under the Rent Reduction Arrangements and the emails set out above suggest to the contrary. The Court could not find that there was any agreement that $45,142.86 was the amount owing under the Rent Reduction Arrangements when no such agreement was put to Mark Taouk in cross-examination and there was no evidence of Mr Li to that effect. Whilst Mr Li said that the $45,142.86 amount was the final accumulation of rental arrears under the Leases, he did not say that this was agreed between himself and anyone at Maroun or TQM. Moreover, Mr Li's evidence that both parties "read" rental arrears in the Handover Agreement as being this sum was not premised upon anything said or done by anyone at Maroun or TQM.
15. In the circumstances, I would have rejected Inndeavor's contention that the amount owing under the Rent Reduction Arrangements as at 3 November 2021 was $45,142.86.

Did the primary judge err in finding that TQM was not a party to the Handover Agreement?

1. As set out above, in appeal ground 1, Inndeavor contends that the primary judge erred in not finding that TQM was a party to the Handover Agreement. Inndeavor contends that it was implicit in the terms of the Handover Agreement, in particular cll 1, 4-5 and 8, that TQM was being referred to, and was a party. For the reasons set out below, that contention must be rejected having regard to how Inndeavor conducted its case before the primary judge.

Inndeavor's position before the primary judge as to whether TQM was a party to the Handover Agreement

1. Inndeavor's pleaded case was that the Handover Agreement was an agreement between Inndeavor (and Future Pacific) and Maroun.
2. In its Amended Statement of Claim filed 23 December 2022 ("ASOC"), Inndeavor pleaded, at [16], that on 5 October 2021 Maroun agreed to terminate the Leases, describing this as the "Transition Agreement" (Inndeavor's name for the Handover Agreement). This pleading was particularised by reference to the Handover Agreement, described as an agreement between Inndeavor, Future Pacific, and Maroun. In its ASOC at [17], Inndeavor pleaded that (also) on 5 October 2021 TQM agreed to terminate the Leases but unlike at [16], this is not then described as the "Transition Agreement" (i.e., the Handover Agreement). At [17], by way of particulars, Inndeavor repeated and relied upon the particulars provided under [16].
3. On the first day of the trial, 8 November 2023, Inndeavor applied (and was granted leave) to amend its pleading to rely upon accord and satisfaction constituted or evidenced by the Handover Agreement. The ASOC was amended to add [17A]: "The agreed termination of the residential tenancy agreements as between [Inndeavor] and [Maroun] and/or [TQM] gave rise to an accord and satisfaction as between the parties which has been performed by [Inndeavor]."
4. It is thus apparent that Inndeavor's pleaded position, including on the amendment, was not that TQM was a party to the Handover Agreement, but that through the Handover Agreement TQM agreed to terminate the Leases.
5. That Inndeavor's pleaded case was not that TQM was a party to the Handover Agreement is also apparent from its FASOC at [22]-[24]. In those paragraphs, Inndeavor alleged that in not refunding the rental bond moneys to Inndeavor, both Maroun and TQM were in breach of the Leases: at [22]-[23], but only relied upon this being a breach of the Handover Agreement as against Maroun: at [24].
6. For completeness, it should be noted that, in their defence, Maroun and TQM pleaded that the Handover Agreement was signed by a representative of Maroun and a representative of Inndeavor and Future Pacific Realty; relied upon the terms of the Handover Agreement; and otherwise denied [16]-[17] of the ASOC (which were relevantly the same as in the FASOC).
7. Turning then to the cross-claim, by way of amendment to its defence to cross-claim, at [7], Inndeavor pleaded, in answer to the whole of the claim by Maroun and TQM, that the Handover Agreement gave rise to an accord and satisfaction which had been performed by Inndeavor. Nowhere in its amendments to its cross-claim did Inndeavor plead that TQM was a party to the Handover Agreement.
8. In his oral closing submissions in chief, Inndeavor's counsel relied upon the Handover Agreement as constituting an accord, which was satisfied, and drew no distinction between the position of Maroun and TQM. In his oral closing submissions, counsel for Maroun and TQM, however, submitted that Maroun was the only entity which signed the Handover Agreement, and Maroun could not release a significant pre-existing entitlement of TQM to be paid Rental Arrears. Counsel for Maroun and TQM contended, further, that the parties did not intend any general release of Inndeavor's obligations to TQM. He relied, moreover, upon Maroun and TQM being separate legal entities.
9. Counsel for Inndeavor, in oral submissions in reply, sought to respond to these points. He clarified, first, that: "It's not pleaded and was never intended to be put as there's some sort of agency. There'd need to be a proper basis for that case and it's not here, and that's as high as I deal with that topic of the emails."
10. Second, when the primary judge asked counsel for Inndeavor whether he was making submissions "in the context that the second defendant is not a party to the 5 October 21 agreement", he responded "[i]ndeed, yes."
11. At the conclusion of counsels' oral submissions, the primary judge asked counsel for Inndeavor whether TQM was bound by the Handover Agreement. Counsel for Inndeavor responded: "I don't say that."
12. The primary judge then asked counsel for Inndeavor how it was that the Handover Agreement bound TQM. Counsel's first response to this was "with great difficulty", adding "I can't argue my way around the signature block in the bottom of the document" although he noted that the document was drawn and presented by Mr Yazbeck, who counsel said was a director of TQM (although in fact, according to Australian Securities and Investments Commission company extract documents in evidence, Maroun Taouk was the only director of TQM). Counsel made the following submission: "COUNSEL: Thought about and considered and with the benefit of the trial run and submissions, that is the reason I say, with great difficulty, I have difficulty resisting the proposition that it's - I can't resist a proposition that it's not bound. I can't argue with an objective document and the signature block in the form that it is. HIS HONOUR: Physically it's not a signatory to it. Physically it's not named in the document. Those things are different to the legal consequences. The legal consequences put against you are that because it's not a signatory, it's not named, there's no mention of it in the document, then it's not bound by does your client accept that or not? COUNSEL: I have to accept that. It's objectively the document on its face. I can't argue around that and the consequence of that is that in theory it leaves the tenancy agreements as they are as between - not between all parties, but it leaves Inndeavor with accrued rights under an old agreement if it hasn't come to terms with TQM in relation to claims it has against it. My instructor asks me for a moment."
13. Counsel for Inndeavor then asked for the opportunity to take instructions before giving his final position. Having done so, counsel confirmed that: "The concession that I made before we broke for the lunch adjournment that TQM is not a party to the transition agreement, that remains the case."
14. However, counsel sought to resist judgment being given in favour of TQM for the Rental Arrears on the basis that: "… there is no - prior to the 5 October agreement, there is no distinction between Maroun and TQM in a sense that I certainly inferred it was an approach I took when considering the case, given what I have to do and I think your Honour may be alive to it, that your Honour raised in the course of discussions with both of us, that what significance attaches to the TQM email. I don't put that as agency. I can't. It's simply to ground a submission that there's no distinction between the two corporate entities, Maroun and TQM. Routinely, Mr Yazbeck would correspond and communicate positions that led up to the transition agreement. Equally, Ms Dawkins would communicate positions in respect of setting procedure, you know, for the - my phrase - the working out of the transition agreement. She would set the procedure in process and follow things up. Equally, if there has been an issue - and this is a submission in a general sense drawn from the material, as is apparent on the material in evidence. If there is an issue that TQM or Maroun have had - sorry, I'd better express that submission with care, given the concession I've made that TQM is not a party to the agreement. If there has been an issue with the performance of the transition agreement, somebody with a TQM signature block would approach and said generally, "We've got this issue, you need to do something about it." Equally, when there's been an issue that the defendants, the cross-claimants have had with Inndeavor's performance or Future Pacific's performance without distinction as to who, somebody has written and somebody has said - I say this generally - "Hey, this is an issue, you need to sort it out or we need to have a meeting to discuss." To deal with the issue put to me, I cant state the position any higher than that."
15. When the primary judge put to counsel for Inndeavor that this "[doesn't] seem to get you there, in light of your acceptance that the second defendant wasn't a party to the …" , counsel responded that he could not "embrace" that conclusion, but "that would seem to be the logical consequence but I'm - in fact, my instructions are I just have to let your Honour continue to write a judgment."
16. The primary judge then said: "It's going to be very brief of [sic] this question because there's no opposition, really, to the defendant's submission that because the second defendant wasn't a party to that 5 October 21 agreement, that it can't be used against it as an accord and satisfaction; it can't prevent judgment being entered, and that's the only basis upon which the plaintiff has said judgment can't be entered by either defendant against it on the cross-claim."
17. Counsel for Inndeavor said nothing in response to this to suggest that the primary judge's understanding of Inndeavor's position was incorrect.
18. In my judgment, it is very clear from the submissions of counsel for Inndeavor at first instance, and from the exchanges between counsel and the primary judge, that both before and after taking instructions, counsel conceded that TQM was not a party to the Handover Agreement. I would reject Inndeavor's submission on appeal to the contrary. Contrary to Inndeavor's submission on appeal, the concession of counsel at first instance went beyond the fact that TQM was not named in the Handover Agreement. Counsel expressly conceded that TQM was not a party to that agreement: see above at [64]-[65]. All that counsel declined to embrace was the consequence of TQM not being a party to the Handover Agreement, namely that TQM was not bound by the accord.
19. Having regard to the position taken by Inndeavor at first instance, Inndeavor should not be permitted, on appeal, to contend that TQM was a party to the Handover Agreement. As Maroun and TQM submit, at first instance, Inndeavor expressly conceded that TQM was not a party to the Handover Agreement and that Maroun did not enter the Handover Agreement as agent for TQM. It would be prejudicial to the administration of justice to permit Inndeavor to resile from that concession on appeal: see eg Farriss v Axford [2023] NSWCA 255 at [58]. In any event, had Inndeavor advanced a contention at trial that TQM was bound by the Handover Agreement, TQM would likely have sought to meet that contention by adducing evidence by way of surrounding circumstances. To the extent that Inndeavor's submissions on appeal relied upon both principles of agency, and partnership, Maroun and TQM would likely have sought to lead evidence going to how those principles may have operated on the facts of this particular case. Contrary to the submission of Senior Counsel for Inndeavor on the appeal, it could not be assumed that there would be no evidence that could be led going to these issues, particularly given that there are relevant communications in the evidence passing between both Mark Taouk (a director of Maroun and co-owner and co-founder of TQM) and Mr Li, and between employees of TQM such as Mr Yazbeck and Ms Dawkins and Mr Li. That is a further reason for refusing to permit Inndeavor to raise the point on appeal, for the first time: Suttor v Gundowda Proprietary Limited (1950) 81 CLR 418 at 438; [1950] HCA 35.
20. In these circumstances, I would have rejected appeal ground 1.

Did the primary judge err in finding that the obligation to pay the Rental Arrears was owed severally, and not jointly, to Maroun and TQM?

1. In appeal ground 2, Inndeavor contends that the primary judge should have found that the entitlement to payment of the Rental Arrears was a joint entitlement of Maroun and TQM (and not a joint and several, or several entitlement), such that a release of this entitlement by Maroun effectively released TQM's entitlement also: relying upon Wallace v Kelsall (1840) 151 ER 765.
2. As Senior Counsel for Inndeavor on the appeal candidly told the Court, this argument had no "anchor" in Inndeavor's pleading. In its FASOC Inndeavor pleaded, at [6A], that it entered into the Agreement to Lease with Century 21 as leasing agent for Maroun, or "alternatively", TQM (emphasis added). Inndeavor then pleaded, at [7], that it entered into the Leases with Maroun. At [8], Inndeavor pleaded that it entered the Leases with TQM. The allegations pleaded in both [7] and [8] were particularised by reference to the Leases and the Agreement to Lease. There was no mention of joint obligations or entitlements. Moreover, as set out at [14] above, it appears that only 41 of the Leases were in the form of residential tenancy agreements, with the remaining 68 Leases relying upon the terms of the Agreement to Lease, and as regards the Agreement to Lease, Inndeavor pleaded that Century 21 executed that agreement as agent for Maroun or TQM. What this shows is that there is some uncertainty on the face of the documents, such that evidence of surrounding circumstances may have been relevant in determining the nature of the entitlement to receive rent under the Leases.
3. Moreover, as Senior Counsel for Inndeavor on the appeal also told this Court, Inndeavor did not make any submissions before the primary judge to the effect that the entitlement to be paid the Rental Arrears was one held jointly by Maroun and TQM such that any release by Maroun extinguished the entitlement of TQM.
4. In these circumstances, again I would not permit Inndeavor to raise this contention for the first time on appeal. To the extent that appeal ground 2 turns upon the proper construction of the Leases, to determine whether the entitlement to be paid rent was joint, joint and several, or several, evidence could have been adduced by way of surrounding circumstances going to construction of both the Agreement to Lease and the 41 Leases on this question. Counsel for Maroun and TQM submitted that, had this issue been the subject of a pleaded case and submissions at first instance, they would have sought to adduce evidence of representations made in the course of negotiations and material going to a joint understanding of the parties.
5. In circumstances in which (a) there is no finding (see [75] above) that the entitlement of Maroun and TQM to be paid rent was joint, as opposed to joint and several, or several, (b) there is a finding (see [6] and [71] above) that TQM was not bound by the Handover Agreement, and (c) there is a finding (see [34] above) that the Handover Agreement did not operate to discharge or release Inndeavor's liability to pay the Rental Arrears in any event, it is not appropriate to consider further the question whether any obligation Inndeavor owed to pay the Rental Arrears to TQM might have been released by reason of the Handover Agreement.
6. In these circumstances, I would not have permitted Inndeavor to advance these contentions on appeal and would have dismissed appeal ground 2.

Conclusion

1. It follows that the appeal must be dismissed.
2. As neither party submitted to the contrary, costs should follow the event.
3. Accordingly, the orders I propose are: 1. Appeal dismissed. 2. Appellants to pay the respondents' costs of the appeal.
4. McHUGH JA: I agree with Stern JA.

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