[2015] NSWCA 12
Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
[2012] HCA 17
Fiorenza v Fiorenza [2024] NSWSC 549
Hart v Basha [2024] NSWSC 1441
Jones v Dunkel (1959) 101 CLR 298
[1959] HCA 8
Kramer v Stone (2023) 112 NSWLR 564
[2023] NSWCA 270
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
Source
Original judgment source is linked above.
Catchwords
[2015] NSWCA 12
Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345[2012] HCA 17
Fiorenza v Fiorenza [2024] NSWSC 549
Hart v Basha [2024] NSWSC 1441
Jones v Dunkel (1959) 101 CLR 298[1959] HCA 8
Kramer v Stone (2023) 112 NSWLR 564[2023] NSWCA 270
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361[2011] HCA 11
Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500
[2017] NSWCA 106
Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713
[2007] NSWSC 5
Nock v Maddern [2018] NSWCA 239
Saleh v Romanous (2010) 79 NSWLR 453
[2010] NSWCA 274
Slade v Brose [2024] NSWCA 197
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Judgment (9 paragraphs)
[1]
Introduction
The first defendant in these proceedings, Mr Garry Johnston, is the registered proprietor of a property at 21 Main Street, Clunes, being the land in folio identifier 1/XXXXXX (the Property).
Mr Johnston operated a service station and an automechanic workshop business on the land for many years (the Service Station business and the Workshop business). The plaintiff, Jigaroo Holdings Pty Ltd (Jigaroo), entered into a contract to purchase the Service Station business (the SS Sale Contract), a lease of the premises within the Property from which the Service Station business was conducted (the SS Lease) and a call option deed for the purchase of the Workshop business on terms that included a lease of the premises within the Property from which the Workshop business was conducted, on 31 July 2018 (the Workshop Call Option). The SS Lease was for a term of one year commencing on 1 August 2018, with three options to renew for further terms of five years each. The Workshop Call Option was exercisable within one year, by 1 August 2019.
It is common ground that Jigaroo became the owner of the Service Station business and the lessee of the Service Station premises on the terms of the SS Lease from 1 August 2018.
The first option to renew the SS Lease for a term of five years was exercisable by Jigaroo in writing during the period between 1 May 2019 to 1 June 2019. Jigaroo did not exercise the option. As will be seen below, Mr Tristan Robinson, who was the director of Jigaroo who had negotiated the SS Sale Contract and the SS Lease on behalf of Jigaroo, cannot recall having any communications with Mr Johnston about renewing the SS Lease or even turning his mind to "expressly renewing" the SS Lease in writing, during that period. Jigaroo has nevertheless remained in the Service Station premises, operating the Service Station business and paying rent on a weekly basis in the same amount as was agreed in July 2018, save for a period during which the rent was reduced by mutual agreement during the COVID-19 pandemic.
In about June 2021, Jigaroo entered into a contract to purchase the Workshop business and entered into a lease of the Workshop premises for a term of five years, with two options to renew for further terms of five years each.
On 25 October 2024, Mr Johnston entered into a contract for the sale of the Property to the second defendant, Mac Corp Pty Ltd (Mac Corp).
Jigaroo commenced these proceedings on 29 October 2024 claiming declarations that Jigaroo had renewed the SS Lease for a term of five years on 1 August 2019 and again on 1 August 2024, an order that Mr Johnston is estopped from denying those renewals, an order that the resulting equitable leases be specifically performed, and an order requiring Jigaroo and Mr Johnston to execute a lease of the Service Station premises commencing on 1 August 2024 prior to Mr Johnston's completion of the contract for sale of the Property to Mac Corp. Further, or in the alternative, Jigaroo sought a declaration that Mr Johnston had engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law in Schedule 2 to the Competition and Consumer Act 2010 (Cth) or had made a false or misleading representation concerning the nature of Jigaroo's interest in the Property in contravention of s 30(1)(b) of the Australian Consumer Law, and orders restraining Mr Johnston from denying the alleged first and second renewals of the SS Lease and requiring Mr Johnston to execute a lease commencing on 1 August 2024 prior to completion of the contract for sale of the Property to Mac Corp.
Central to the estoppel claims - which rely on the doctrines of promissory estoppel, proprietary estoppel by encouragement, proprietary estoppel by acquiescence, estoppel by representation, and conventional estoppel - are three representations alleged to have been made by Mr Johnston to Mr Robinson during their negotiations in the period from March to June 2018 which preceded the execution of the SS Sale Contract, the SS Lease and the Workshop Call Option on or about 31 July 2018. These are defined in the statement of claim as the "Term Representation", the "Trial Representation" (or "Trial Period Representation") and the "Workshop Representation" (together, the alleged Pre-Contractual Representations).
The alleged Term Representation is pleaded in the following terms: [1]
"During the period March 2018 to June 2018, Mr Robinson and Mr Johnston held meetings to discuss Jigaroo purchasing and leasing both the Service Station and Workshop.
In one or more of the meetings …:
a. Mr Robinson stated to Mr Johnston that if Jigaroo were to purchase the Service Station and/or Workshop, he would require a 15 year lease over each premises respectively, by options or otherwise;
b. Mr Johnston represented to Mr Robinson that he agreed to this (the Term Representation)."
The alleged Trial Representation is pleaded in the following terms: [2]
"In one or more of the meetings … :
a. Mr Johnston represented to Mr Robinson that:
i. for him to sell the Service Station to Jigaroo, Mr Johnston required an initial 12-month trial period following which both parties could walk away from the lease and sale of business agreement for the Service Station (the Trial Period); and
ii. if the parties decided they were happy to continue to work together after the Trial Period, a 15 year lease over the Service Station, by options or otherwise, would then commence; and
(the Trial Period Representation)
b. Mr Robinson agreed to the matters pleaded in sub-paragraphs (a)(i) and (ii) above."
The assumption pleaded by Jigaroo as the basis for its conventional estoppel claim is an assumption allegedly made by Mr Robinson during the period from 1 May to 1 June 2019 that the SS Lease would be renewed "in accordance with the Trial Representation" (the Renewal Assumption).
The alleged Workshop Representation is pleaded in the following terms: [3]
"In one or more of the meetings … , Mr Johnston and Mr Robinson agreed that:
a. upon purchasing the Service Station business, Jigaroo would obtain an option to purchase the Workshop business in a 'staged process';
b. if Jigaroo acquired the Workshop it would have the benefit of concurrent leases, or a single joint lease, over both the Service Station and the Workshop premises;
c. Jigaroo required a 15 year lease, exercisable by options or otherwise, for both the Workshop and the Service Station,
(the Workshop Representation)."
The alleged Pre-Contractual Representations are also central to Jigaroo's misleading or deceptive conduct claims. It is the Term Representation, the Trial Representation and/or the Workshop Representation that Jigaroo alleges were misleading or deceptive for the purpose of its claims under ss 18 and 30(1)(b) of the Australian Consumer Law.
Counsel for Jigaroo conceded at the hearing that the Term Representation was consistent with the SS Sale Contract, SS Lease and Workshop Call Option Deed executed on or about 31 July 2018, and that Mr Johnston had not subsequently resiled from the Term Representation. Consistently with the Term Representation, Jigaroo was granted a lease of the Service Station premises in July 2018 for a term of one year with three options to renew for further terms of five years each, and was later granted a lease of the Workshop premises for a total period of 15 years including two options to renew for terms of five years each. Jigaroo failed to exercise its option to renew the SS Lease.
Counsel for Jigaroo further conceded, correctly in my opinion, that Jigaroo could not succeed in respect of any of its causes of action unless it proved on the balance of probabilities that Mr Johnston made the Trial Representation or the Workshop Representation during the pre-contractual negotiations in the period from March to June 2018. That includes an unpleaded claim relying on the alleged part performance of the equitable leases in respect of the Service Station premises which Jigaroo asks the Court to declare on the basis of the alleged estoppels. Counsel for Jigaroo conceded that, assuming the part performance claim could be maintained without pleading, it could not rise any higher than the estoppel claims.
For the reasons that follow, the plaintiff has failed to prove on the balance of probabilities the alleged Trial Representation, the alleged Workshop Representation, and the alleged Renewal Assumption which are critical to its various causes of action. The proceedings must therefore be dismissed. I have considered all of the evidence, and all of the parties' written and oral submissions, before coming to that conclusion. Given the urgency with which the parties require these proceedings to be determined, [4] I have referred in these reasons only to those aspects of the evidence and submissions that have been directly relevant to my determination.
[2]
Salient facts
Over a period of about four months from about March 2018, there were discussions between Mr Robinson and Mr Johnston concerning the potential purchase by Jigaroo of the Service Station and Workshop businesses and potential leases of the Service Station and Workshop premises. Mr Robinson was a director of Jigaroo at the time of those negotiations, and is now its sole director. It is common ground that Mr Robinson participated in those discussions for and on behalf of Jigaroo.
In his affidavit sworn on 28 October 2024, Mr Robinson deposed that his discussions with Mr Johnston occurred over several meetings during the period from about March to June 2018. Mr Robinson's father, Mr Steve Robinson, participated in those discussions. Mr Robinson deposed that, given the passage of time, he does not have a clear recollection of the precise timing of the meetings or the exact words used in conversations during those meetings, and he is not aware of any documents recording the conversations. However, Mr Robinson claimed to recall "the gist of what was discussed and agreed at these meetings" because "I relied upon what was discussed".
Mr Robinson deposed that, at the first meeting, he and his father agreed with Mr Johnston that the purchase price for the Service Station business would be $130,000 plus the value of the stock which Mr Johnston estimated to be $60,000, and that the purchase price for the Workshop business would be $110,000 plus the value of the stock which Mr Johnston estimated to be $10,000. Mr Robinson then deposed that:
"26. However, because of large cost to purchase both businesses, I wanted enough time to operate the Service Station business and Workshop business to turn a profit on the purchases and for the arrangement to be financially feasible. I also wanted to be able to benefit from any goodwill established in respect of the business. During these meetings, I recall that I said to Garry that I required a 15 year lease both for the Service Station and the Workshop, and Garry said that he agreed to this. …
27. In these meetings I recall that Garry requested that the first year of Jigaroo running the Service Station to be a 12-month 'trial period' to see how we would all work together and whether we could trust each other. Garry told us in these meetings that in the previous several years he had unsuccessfully ran the Service Station business twice. The first person he ran it to lasted only around 12 to 18 months before going under, and Garry had needed to then step back in and restart the business again. A second person then tried to run the Service Station, who attempted to turn it into an organic health food shop. The business only lasted six to eight months before also going under. Garry had again needed to step back in, change the fitout of the shop, restock it and start again. Garry said he was concerned about this happening again with us and wanted to work out an arrangement to avoid a similar outcome.
28. As a result of these concerns, Steve and I (on behalf of Jigaroo) agreed to a one-year trial period where both sides could walk away from the Service Station business and lease if the relationship was not working out after the first year. Garry said that he wanted the trial period to see if we would pay our bills on time, if we would work well together and if we could trust each other. If the year ended and Garry and we were both happy, then the lease would continue for the long-term duration which we had agreed, and we would revisit the idea of taking over the Workshop. If the relationship did not work out, we agreed that Jigaroo would walk away from the Service Station business and give up the stock that it had purchased but not be required to pay the purchase price on the business …
29. …
30. At the last of the meetings, which was held at the Workshop in around May 2018, I asked Garry if he would be interested in a staged takeover process. I said that Jigaroo was in interested in taking over the Service Station first and before potentially also taking over the Workshop. Garry said that he agreed to this approach.
31. I was interested in doing a staged takeover process because it would give me more time to introduce myself to the locals in the areas and become established in the community before opening the Workshop.
32. Steve and I also agreed with Garry to enter into a vendor financing arrangement where Garry would loan Jigaroo the purchase price of the Service Station business and Jigaroo would make ongoing interest-only repayments on the loan until the full purchase price was eventually settled after the business hard [sic - had] started trading and Jigaroo could refinance the loan and make full payment to Garry. Jigaroo would also be required to make an upfront payment of ~$60,000 to purchase the Service Station business' stock.
33. The vendor financing arrangement was also adopted because I was aware that Jigaroo would likely have been unable to obtain additional financing for the purchase because, on the terms agreed, it would already need a loan of ~$60,000 to make the upfront purchase of the Service Station business' stock. This approach was also taken in line with the 'trial period' which Steve and I agreed with Garry because we were able to see if our business relationship with Garry would work out before being required to pay the full purchase price for the Service Station business.
34. In 2018, Steve and I anticipated that it would take Jigaroo one to two years to pay off the loan from Garry and pay out in full the price of the Service Station. I recall that we discussed at several of the meetings the need for a long-term lease for the Service Station to enable the acquisition of the business to become profitable. Steve and I were not interested in acquiring a business to simply break-even on the purchase price or to lose money.
35. If Jigaroo wanted to continue the staged takeover of the Clunes Auto Centre business after the first year and purchase the Workshop … Garry and I agreed that Jigaroo would have the option to buy the Workshop business for $120,000. It was also discussed and agreed that if this occurred, that Jigaroo would maintain concurrent leases, or a single joint lease, over both the Service Station and the Workshop premises."
[3]
For the further period in Item 12A:
From the commencement date to the first rent review date: Current Market Rental
(for example: Current Market rent)
Afterwards: CPI
At the new yearly rent beginning on each review date by equal monthly instalments.
[4]
For the further period in Item 12B:
From the commencement date to the first rent review date: Current Market Rental
(for example: Current Market rent)
Afterwards: CPI At the new yearly rent beginning on each review date by equal monthly instalments.
[5]
For the further period in Item 12B1:
From the commencement date to the first rent review date: Current Market Rental
(for example: Current Market rent)
Afterwards: CPI At the new yearly rent Beginning on each review date by equal monthly instalments."
[6]
Clause 4 of the lease annexed to the SS Sale Contract provided:
"CLAUSE 4 LEASE PERIOD
How long is this lease for?
4.1 This lease is for the period stated in item 1 in the schedule, commences on the date stated in item 2 in the schedule and ends on the date stated in item 3 in the schedule.
4.2 If a further period, commencing when this lease ends, is stated in item 12A in the schedule then the lessee has the option to renew this lease for that period.
4.3 The lessee can renew this lease more than once if that is stated in item 12B in the schedule. However the period of tenancy under this lease and under any renewal(s) is, in total, not longer than the maximum period stated in item 12C in the schedule.
4.4 The lessee can exercise the option only if-
4.4.1 the lessee serves on the lessor a notice of exercise of option not earlier than the first day stated in item 12D in the schedule and not later than the last day stated in item 12E in the schedule;
4.4.2 there is at the time of service no rent or outgoing that is overdue for payment; and
4.4.3 at the time of service all the other obligations of the lessee have been complied with or fully remedied in accordance with the terms of any notice to remedy given by the lessor.
If this lease is extended by legislation, items 12D and 12E in the schedule are adjusted accordingly.
4.5 After exercising the option the lessee must continue to pay all rents and outgoings on time and continue to comply with all of the lessee's obligations under this lease. If the lessee does not do so, the lessor may treat any breach as being a breach of the new lease as well as of this lease.
4.6 A new lease will be the game as this lease except for-
4.6.1 the new rent;
4.6.2 the commencement date and the termination date;
4.6.3 the omission of clauses 4.2, 4,3, 4.4, 4.5 and 4.6 and items 12A and 12B in the schedule in the last lease allowed in item 12 in the schedule;
4.6.4 item 12B becoming item 12A;
4.6.5 adjustment of item 12C in the schedule; and
4.6.6 adjustment of items 12D and 12E in the schedule. The number of days between the dates stated in items 12D and 12E in the schedule of the new lease and the termination date of the new lease and the number of days between each date stated in items 12D and 12E in the schedule of this lease and the termination date of this lease are to correspond.
If the new rent is to be current market rent it will be decided in the same way that current market rent is to be decided under Method 3 stated in clause 5 assuming that this lease and the new lease were one continuous lease and the commencement date of the new lease was a rent review date."
[7]
Consideration and determination
I have found that Jigaroo failed to exercise its option to renew the SS Lease during the period from 1 May 2019 to 1 June 2019, and that the question of renewal of the SS Lease was not even discussed between Mr Robinson and Mr Johnston prior to its expiry on 1 August 2019. From that time, Jigaroo had a monthly tenancy in accordance with clause 12.4 of the SS Lease, with no option to renew. [13] There is therefore no basis for the declarations claimed by Jigaroo to the effect that it renewed the SS Lease for two further terms of five years each commencing on 1 August 2019 and 1 August 2024.
Promissory and proprietary estoppel are species of equitable estoppel, the elements of which were articulated by Brennan J in Waltons Stores (Interstate) Ltd v Maher: [14]
"… it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."
It is well established that those elements are not to be applied in every case in a mechanical fashion. However, if one of the elements is not satisfied in a particular case, "it would be necessary to think thoroughly about why not". As Ward P put it in Slade v Brose, "[i]t is unconscionability, rather than 'ticking the box' of each of Brennan J's elements, which will be decisive". [15]
One important difference between promissory and proprietary estoppel is that promissory estoppel operates as a restraint on the enforcement of rights, and must be negative in substance. In Saleh v Romanous, the Court of Appeal held that promissory estoppel "is not the equitable equivalent of a contract", and operates as a restraint on the enforcement of rights that the defendant would otherwise be able to enforce against the plaintiff in circumstances where it would be inequitable for the defendant to enforce those rights having regard to the dealings that have taken place between the parties. [16] In Ashton v Pratt, Bathurst CJ observed that there is a significant body of authority to that effect, whilst also acknowledging significant dicta to the contrary. [17] As I said recently in Hart v Basha, [18] I respectfully agree with and embrace Peden J's conclusion in Fiorenza v Fiorenza, [19] referring to Nock v Maddern, [20] that, until this uncertainty is resolved, I am bound by the decision of the Court of Appeal in Saleh v Romanous, "the effect of which, on lower courts, is that promissory estoppel must be viewed only as a restraint on the enforcement of rights, and negative in substance".
[8]
Conclusion and orders
The order of the Court is:
1. Proceedings dismissed.
I am not aware of any reason why the plaintiff should not be ordered to pay the defendants' costs on the ordinary basis as agreed or assessed. However, I will hear the parties in relation to costs in the event that any party contends for a different costs order.
[9]
Endnotes
Omitting particulars.
Omitting particulars.
Omitting particulars.
The proceedings were listed for final hearing before me on an urgent basis on 29 November 2024. The parties require the proceedings to be determined on a final basis prior to 6 December 2024, when the contract for sale of the Property to the second defendant is due to be completed.
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63]-[64] (Heydon, Crennan and Bell JJ); Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [165]-[167] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ), [232] (Heydon J).
See [21] above.
See [18] above.
Watson v Foxman (1995) 49 NSWLR 315 at 318-319 (McLelland CJ in Eq) (Watson v Foxman); Wild v Meduri [2024] NSWCA 230 at [251] (Bell CJ, Kirk JA agreeing) (Wild v Meduri).
Watson v Foxman at 318-319 (McLelland CJ in Eq); Wild v Meduri at [341]-[356] (Kirk JA, Bell CJ agreeing with Kirk JA at [254]).
See [38] above.
See [42] above.
See [72] above.
See [66] above.
(1988) 164 CLR 387 at 428-429; [1988] HCA 7.
Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270 at [78] (Ward P, Leeming and Kirk JJA agreeing) and the authorities there referred to; Slade v Brose [2024] NSWCA 197 at [200]-[201] (Ward P, White and Stern JJA agreeing) and the authorities there referred to.
(2010) 79 NSWLR 453; [2010] NSWCA 274 at [73]-[74] (Handley AJA, Giles JA and Sackville AJA agreeing).
(2015) 88 NSWLR 281; [2015] NSWCA 12 at [138] (Bathurst CJ, McColl JA agreeing).
[2024] NSWSC 1441 at [150].
[2024] NSWSC 549 at [75]-[78].
[2018] NSWCA 239 at [35] (White JA, Leeming JA and Sackville AJA agreeing).
(2007) 13 BPR 24,713; [2007] NSWSC 5 at [32].
Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 at [42]-[44] (Macfarlan JA, McColl JA and Sackville AJA agreeing) and the authorities there referred to (Miller Heiman).
The italicised parts of paragraphs 33 and 35 of Mr Robinson's affidavit set out above were admitted subject to an order under s 136 of the Evidence Act 1995 (NSW) limiting their use to evidence of Mr Robinson's state of mind.
Mr Robinson deposed that, after he and Mr Johnston had agreed "the broad terms", solicitors acting for Mr Johnston and for Jigaroo began preparing formal documentation. Ms Debra Gruszka of Hungerford Lehmann Solicitors acted for Mr Johnston and Mr Keith Graham of Grahams Solicitors acted for Jigaroo. Contemporaneous correspondence between those solicitors indicates that Grahams Solicitors were acting for Jigaroo from at least 4 July 2018 until at least 24 July 2018, that Hungerford Lehmann Solicitors sent to Grahams Solicitors on 11 July 2018 drafts of the proposed contract for sale of business and lease concerning the Service Station and a draft call option concerning the Workshop, and that Grahams Solicitors reviewed and discussed those documents with their client before requesting certain amendments on 13 July 2018. The amendments that Grahams Solicitors requested on behalf of Jigaroo included a change to the method of determining the rent payable in the first year of the first option period under the Service Station lease, substituting consumer price index review for market rent review. It is inherently probable that, in the course of taking instructions about this proposed amendment, Grahams Solicitors discussed with Mr Robinson the one year initial term of the Service Station lease, the further terms available if the options to renew were exercised, the rent payable during the initial term, the basis on which rent should be reviewed as at the commencement of the first option term if Jigaroo exercised its option to renew, and the rent that would then be payable in each subsequent year of the first option term and during the second option term if Jigaroo exercised the second option, and I so find.
Mr Robinson gave evidence that, in late July 2018, he ceased instructing Grahams Solicitors and requested Hungerford Lehmann Solicitors to correspond with him directly. On 31 July 2018, Hungerford Lehmann Solicitors sent revised drafts of the documents to Grahams Solicitors, noting Mr Robinson's request for Hungerford Lehmann Solicitors to correspond with him directly but also noting that Mr Robinson and the other guarantors under the proposed lease of the Service Station were required to obtain independent legal advice before signing the documents.
Jigaroo did not adduce any evidence from Mr Steve Robinson about the discussions that he and his son held with Mr Johnston concerning Jigaroo's potential acquisition of the Service Station and Workshop businesses and potential leases of the associated premises. Mr Robinson acknowledged in cross-examination that there is no reason why his father could not have been called to give evidence. I infer that any evidence that Mr Steve Robinson could have given about the discussions with Mr Johnston during the period from March to June 2018 would not have assisted Jigaroo's case. I reject Jigaroo's submission that it was not necessary to call Mr Steve Robinson because his evidence would have merely corroborated his son's evidence, and because Mr Steve Robinson was not a director of Jigaroo. There is no basis for the submission that Mr Steve Robinson's evidence would have corroborated the evidence of Mr Tristan Robinson. In circumstances where the pre-contractual discussions of Mr Steve Robinson, Mr Tristan Robinson and Mr Johnston are said to be the source of the alleged Pre-Contractual Representations on which all of Jigaroo's causes of action are founded, it is to be expected that Jigaroo would have adduced evidence from Mr Steve Robinson if it would have assisted Jigaroo's case, rather than relying solely on Mr Tristan Robinson's admittedly hazy recollection of "the gist" of the discussions. Whilst I infer that Mr Steve Robinson's evidence would not have assisted Jigaroo, I do not infer that it would have been adverse or harmful to Jigaroo's case. [5]
In his affidavit sworn on 8 November 2024, Mr Johnston deposed:
"33. … I agree that we did discuss a long-term lease for the service station which is why the Lease for the service station ultimately granted three 5 year options to renew the Lease. …
34. … we did discuss having one joint Lease or concurrent lease for both the workshop and the service station but this was on the basis that the plaintiff would exercise the option to purchase the workshop business at the end of the first 12 months and take up the option to renew. …"
Consistently with that evidence, Mr Johnston agreed in cross-examination that he knew that Mr Robinson did not want Jigaroo to buy the Service Station business without a long-term lease of the Service Station premises, and that he did not want Jigaroo to buy the Workshop business without a long-term lease of the Workshop premises.
The italicised parts of paragraphs 33 and 34 of Mr Johnston's affidavit set out above were admitted subject to an order under s 136 of the Evidence Act limiting their use to evidence of Mr Johnston's state of mind.
In his affidavit sworn on 8 November 2024, Mr Johnston also deposed that he agreed during the 2018 discussions to provide vendor finance to Jigaroo for the purchase of the Service Station, repayable after one year, and that he had also agreed to grant Jigaroo an option to purchase the Workshop business that was exercisable one year after completion of its purchase of the Service Station business, meaning that Jigaroo would determine whether to exercise that option at the same time as it was refinancing the Service Station business so as to repay the vendor finance. However, Mr Johnston denied that he had said that he wanted a one year "trial period" and denied that he had said the things attributed to him in paragraph 28 of Mr Robinson's affidavit. Mr Johnston deposed that the initial term of the Service Station lease was fixed at one year at the request of Mr Robinson and his father. It was Mr Johnston's understanding that the reason for that request was to allow time for Jigaroo to build up its trading figures before applying to refinance its purchase of the Service Station business at the end of that first year when the vendor finance would be due for repayment. Mr Johnston deposed that he required the vendor finance for the Service Station business to be repaid one year after completion of the sale irrespective of whether this coincided with the expiry of the initial term of the SS Lease, and whether or not Jigaroo exercised its option to renew the SS Lease. Mr Johnston adhered to that evidence in cross-examination, confirming his recollection that no trial period was discussed and that Jigaroo was entitled to a one year lease of the Service Station premises followed by further terms totalling up to 15 years if Jigaroo exercised its options to renew under the SS Lease.
Mr Johnston also gave evidence that the transaction was only to take effect as a "staged takeover" if Jigaroo exercised the option to purchase the Workshop business at the end of the first twelve months after completing its purchase of the Service Station business, and if it also exercised the option to renew the lease of the Service Station premises at that time.
In his affidavit in reply sworn on 18 November 2024, Mr Robinson adhered to his evidence that Mr Johnston had requested a twelve month trial period, and deposed that:
"… It would have made no sense for Jigaroo to make the investment of buying the Service Station business if it only had a one-year lease over the Service Station premises …"
Mr Robinson also purported to agree with Mr Johnston that:
"… the arrangement agreed between me and Mr Johnston in the initial discussions was that a staged takeover of the business was contingent upon the Service Station lease had being [sic] renewed and the Option Deed being exercised."
That misstates Mr Johnston's evidence referred to at [25] above.
On or about 31 July 2018, Mr Johnston and Jigaroo entered into the SS Sale Contract, the SS Lease, and the Workshop Call Option.
The SS Sale Contract provided for the sale of the Service Station business to Jigaroo for the price of $130,000, with completion to occur on 31 July 2018, failing which either party was entitled to serve a notice to complete requiring the other party to complete within 14 days, time being of the essence. The sale was described as being subject to the grant of a new lease to commence on the completion date of the SS Sale Contract for a term of one year with three options to renew for a term of five years each. In that regard, special condition 14 required Mr Johnston to grant Jigaroo a lease of the Service Station premises substantially in accordance with the lease annexed to the SS Sale Contract.
Annexed to the SS Sale Contract was a lease of the part of the Property known as the Service Station. Items 1 to 4 of the schedule on the first page of the lease stipulated that the lease was for a term of one year commencing on 1 August 2018 and terminating on 31 July 2018, with three options to renew for a period of five years each. The reference to 31 July 2018 as the terminating date is clearly a typographical error, as 31 July 2019 is the date that is one year after the commencing date of 1 August 2018. Items 12 and 13 of the schedule to the lease annexed to the SS Sale Contract, which are picked up by the terms of clauses 4 and 5 of that lease, stipulated:
"Item 12 Option to renew
(cl 4)
A. Further period of five (5) years from 1 August 2019 to 31 July 2024
B. Further period of five (5) years from 1 August 2024 to 31 July 2029
B1. Further period of five (5) years from 1 August 2029 to 31 July 2034
C. Maximum period of tenancy under this lease and permitted renewals: Sixteen (16) YEARS
D. First day option for renewal can be exercised: 1 May 2019
E. Last day option for renewal can be exercised: 1 June 2019
Item 13 A. Rent
(cl 5) For the lease period:
From the commencement date to the first rent review date: $45,760.00 including GST a year by monthly instalments of $3,813.336 including GST
Afterwards: Method 1 At the new yearly rent beginning on each review date by equal monthly instalments.
Clauses 5.4 to 5.11 of the lease annexed to the SS Sale Contract, read together with item 16 of the schedule provided that rent was to be reviewed by reference to current market rent at the commencement of the first year of each five year option term, and reviewed annually by reference to the consumer price index for the remaining four years of each option term. In relation to rent reviews by reference to market, clauses 5.12 to 5.21 of the lease annexed to the SS Sale Contract provided that current market rent was to be agreed by the parties or determined by a valuer acting as an expert.
Clause 12.1 of the lease annexed to the SS Sale Contract provided that the lease ends on the terminating date specified in item 3 of the schedule, being 31 July 2019. Clause 12.4 provided:
"12.4 If the lessor allows the lessee to continue to occupy the property after the end of the lease period (other than under a new lease) then -
12.4.1 the lessee becomes a monthly lessee and must go on paying the same rent and other money in the same way that the lessee had to do under this lease just before the lease period ended (apportioned and payable monthly);
12.4.2 the monthly tenancy will be on the same terms as this lease, except for -
clause 4;
clauses 5.4 to 5.21 inclusive; and
clause 6.2 unless consent has previously been given;
12.4.3 either the lessor or the lessee can end the monthly tenancy by giving, at any time, 1 month written notice to the other expiring on any date; and
12.4.4 anything that the lessee must do by the end of this lease must be done by the end of the monthly tenancy."
Special condition 16 of the SS Sale Contract provided:
"16. Vendor finance
16.1 The Vendor shall on completion grant to the Purchaser finance in the amount of $130,000.00 to complete this purchase and pay the rent and bond in advance upon the following terms and conditions:-
(a) Interest payable on the loan will be 12% pa reducible to 5% pa, provided the monthly payments of interest are paid on or before 7 days from the due date.
(b) The principal sum of the loan shall be repaid 1 year from the date of completion of this contract.
(c) The Purchaser as borrower may at any time repay the whole of the loan including principal and interest without penalty provided the Purchaser gives not less than 21 days' notice of such repayment
(d) Security for the loan shall be a charge over the assets of the Purchaser including all the assets of the business herein sold, personal guarantees from the directors and secretary of the Purchaser, a third registered mortgage over that property known as 1152 Bangalow Road, Bexhill, and a Deed of Priority between the Vendor as lender, the Purchaser as borrower and the First and second mortgagees of the property at Bexhill."
Special condition 17 of the SS Sale Contract provided:
"17 Restraint of Trade.
Notwithstanding the restraint of trade included in this contract being for a period of three (3) years and for a distance of 10 km from the business premises, that shall not preclude the Vendor from continuing to run his workshop business conducted at 21 Main Street, Clunes and the motor vehicle sales business conducted at 23 Main Street, Clunes."
The SS Lease executed by Mr Johnston (as lessor) and Jigaroo (as lessee) on or about 31 July 2018 was in the terms of the lease annexed to the SS Sale Contract described at [34]-[37] above in all material respects, save that the terminating date had been corrected in item 3 of the schedule to 31 July 2019 and the rent payable during the first year of the first five year option term (if the option is exercised) was to be determined by reference to the consumer price index rather than by reference to market. That change to the rent review mechanism in the first year of the first five year option term had been requested by Jigaroo, as I have mentioned earlier in these reasons. [6]
Although Mr Robinson and Mr Johnston both gave evidence that they recalled a separate document being prepared in respect of the vendor finance, no such document was tendered in evidence. Special condition 16 of the SS Sale Contract is the only evidence of the terms of the vendor finance.
The Workshop Call Option provided that, in consideration for the payment of $1.00, Mr Johnston (as seller) granted to Jigaroo (as buyer) an option to purchase the Workshop business on the terms and conditions of a contract for sale of business attached to the Workshop Call Option. The option was exercisable at any time before 1 August 2019 by notice in writing accompanied by a cheque for 10 per cent of the deposit payable under the attached contract, together with that contract duly executed in duplicate, to the offices of Mr Johnston's solicitors. Jigaroo's right to exercise the option was conditional on it not being in breach of the SS Lease or the vendor finance agreement in special condition 16 of the SS Sale Contract.
The contract for sale of business attached to the Workshop Call Option relevantly provided for the sale of the Workshop business to Jigaroo for the price of $100,000, subject to the grant of a lease to Jigaroo of that part of the Property comprising the Workshop business for a term of five years commencing on the date of completion of the contract for sale of the Workshop business, with two options to renew for further terms of five years each. Special condition 12 of the contract for sale of business provided:
"Lease
The Vendor shall grant to the Purchaser a lease for the above premises substantially in accordance with the lease annexed hereto for the workshop premises. However the parties acknowledge that the initial lease may not be for a period of five years, as the Vendor as landlord and the Purchaser has [sic] tenant, have already entered into a lease in relation to the service station premises. The parties acknowledge that it is the intention of both parties that the lease of these premises and the lease for the service station run concurrently, or the Purchaser shall surrender the lease for the service station, and the landlord issue one lease to cover the whole of the premises."
The form of lease annexed to the contract for sale of the Workshop business, which was in turn attached to the Workshop Call Option, was a lease in respect of the Workshop premises for a term of five years commencing on 1 August 2019 and expiring on 31 July 2024, with two options to renew for a period of five years each.
On the basis of the evidence referred to at [17]-[44] above, I find that, during the period from March to June 2018, Mr Robinson and Mr Johnston did discuss and agree upon a 15-year lease in respect of the Service Station premises and, if the Workshop Call Option were exercised, the Workshop premises, by options or otherwise. Mr Johnston accepted this in his affidavit sworn on 8 November 2024. Consistently with that agreement, the SS Lease executed by the parties on or about 31 July 2018 was for an initial term of one year with options to renew for three further terms of five years, being 16 years in total.
I am not persuaded on the balance of probabilities that Mr Johnston requested a "trial period" of twelve months, following which the parties could "walk away" from the SS Lease and the SS Sale Contract if they were not "happy to continue to work together", in which case Jigaroo would not be required to pay the purchase price for the Service Station business. Nor am I persuaded on the balance of probabilities that Mr Robinson agreed, or believed that he had agreed, to any such "trial period" on behalf of Jigaroo. I reject Mr Robinson's evidence about the alleged "trial period" as inherently improbable and unreliable.
It is inherently improbable that the vendor of a business would negotiate the sale of the business on terms that handed title and control over the business to the purchaser from the first day after completion, and financed the purchase price for a period of 12 months, yet permitted the purchaser to "walk away" from the business effectively without paying the purchase price at the end of that 12 month period on the basis of the purchaser's subjective view that it was not "happy" to "work with" the vendor. It is highly improbable that the vendor would expose itself to the risk of the purchaser mismanaging or running down the business and then walking away from it without any liability to the vendor.
It is equally improbable that the purchaser would invest time and effort into operating and developing the business for a "trial period" of 12 months on terms that it would only be entitled to continue to own and operate the business in the business premises thereafter if both the purchaser and the vendor were "happy", by reference to some unspecified criteria, to continue to "work with" one another. If enforceable, such an agreement would effectively hand to the vendor the right to unilaterally take the business back by claiming to be dissatisfied in some way, on the basis that both parties needed to agree that they were "happy" in order for the purchaser to continue to own and operate the business in the business premises.
Furthermore, the alleged agreement about a "trial period" is wholly inconsistent with Jigaroo's unqualified obligation under special condition 16 of the SS Sale Contract to repay the vendor finance one year after completion of the SS Sale Contract, and with Jigaroo's right under the SS Lease to exercise its option to enter into a further lease for five years. It is inherently improbable that Jigaroo and Mr Johnston would have caused their respective solicitors to prepare the SS Sale Contract containing special condition 16 and the SS Lease containing the options to renew, and that they would have executed those documents in those terms, if they had discussed and agreed upon a "trial period" on terms to the effect described in Mr Robinson's first affidavit.
It is inherently probable that Jigaroo did not want to be liable for rent and outgoings under an ongoing long-term lease of the Service Station premises if, following its first year of operating the Service Station business, it was not even in a position to obtain the loan that it would require to refinance the vendor finance that Mr Johnston had advanced to fund Jigaroo's purchase of the Service Station business. Viewed objectively, fixing the initial term of the SS Lease at one year reduced the liabilities to which Jigaroo would be exposed if the Service Station business failed under Jigaroo's ownership and management.
For those reasons, the inherent probabilities and improbabilities are contrary to Mr Robinson's evidence and consistent with Mr Johnston's evidence about how and why the one year duration of the initial term of the SS Lease came about.
In addition to being contrary to the inherent probabilities and improbabilities, Mr Robinson's evidence is inherently unreliable due to the passage of time that passed between the discussions in question in 2018 and the preparation of his evidence in these proceedings in October and November 2024, and his unsurprising inability to recall anything more than "the gist of what was discussed and agreed" with Mr Johnston in 2018. [7] I note that Mr Robinson claims to be able to recall "the gist" because "I relied upon what was discussed". Mr Robinson's claim to have relied on the pre-contractual discussions in the years after Jigaroo entered into the SS Sale Contract, the SS Lease and the associated transaction documents, and his inevitable focus on that reliance claim in the context of the dispute that is now the subject of these proceedings, is one of the very reasons why any memory that he has of "the gist" of the 2018 discussions is unreliable. [8]
Mr Robinson's unreliable and inherently improbable evidence of "the gist" of what he claims was discussed and agreed concerning a "trial period" is the sole basis of the alleged Trial Representation. For the reasons, explained above, Mr Robinson's evidence is insufficient to discharge Jigaroo's onus of proving that Mr Johnston requested and represented that there would be a "trial period" of twelve months, and that Jigaroo agreed to such a "trial period". For the same reasons, Mr Robinson's evidence does not establish on the balance of probabilities that Mr Johnston represented to Mr Robinson that, "if the parties decided they were happy to continue to work together" after the alleged "trial period", then "a 15 year lease over the Service Station, by options or otherwise, would then commence". [9]
It is not in dispute that the parties entered into the Workshop Call Option at the same time as they executed the SS Sale Contract and the SS Lease. On the basis of the evidence of Mr Robinson and Mr Johnston referred to at [19] and [28] above, I find that, in their discussions during the period between about March and June 2018, Mr Robinson and Mr Johnston referred to Jigaroo's proposed acquisition of the Service Station and Workshop businesses as a "staged process" or a "staged takeover", assuming a scenario in which Jigaroo exercised the Workshop Call Option on or before 1 August 2019 and also continued to operate the Service Station business.
On the basis of the evidence of Mr Robinson and Mr Johnston referred to at [19] and [24] above, I find that Mr Robinson told Mr Johnston that Jigaroo would require a 15 year lease of the Workshop premises, by options or otherwise, if it purchased the Workshop business.
On the basis of the evidence of Mr Robinson and Mr Johnston referred to at [19] and [24] above, and on the basis of the provisions of special condition 12 of the contract for sale of the Workshop business annexed to the Workshop Call Option referred to at [43] above, I find that, in their discussions during the period between about March and June 2018, Mr Robinson and Mr Johnston did discuss and agree that, if Jigaroo exercised the Workshop Call Option, then the initial term of the lease of the Workshop premises may be different from the five years stipulated in the lease annexed to the Workshop Call Option so as to align the expiry of that term with the expiry of the then current term of the SS Lease, with the intention that either the terms of the lease of each premises should expire and fall due for renewal at the same time, or alternatively that there should be one single lease in respect of the two premises. Both alternatives plainly assumed a scenario in which Jigaroo had an ongoing lease of the Service Station premises for a fixed term at the time that it exercised the Workshop Call Option, and I find that those discussions were conducted on the basis of that assumption. The evidence does not support Jigaroo's contention that Mr Robinson and Mr Johnston agreed that, if Jigaroo acquired the Workshop business, then, without more, it would have the benefit of concurrent leases or a single joint lease over both the Service Station and the Workshop premises. I reject that contention.
In his affidavit sworn on 28 October 2024, Mr Robinson deposed that, in causing Jigaroo to enter into the SS Lease, he "trusted that Garry would act consistently with what had been discussed and agreed between us". In my opinion, it is inherently improbable that Mr Robinson engaged Grahams Solicitors to act on behalf of Jigaroo in negotiating the terms of the SS Lease and the other contracts that were executed at the same time, yet relied on Mr Johnston to ensure that the documents were consistent with what he understood "had been discussed and agreed between us" rather than relying on Grahams Solicitors to review those documents, and inform and advise him in relation to their contents. In any event, I have found for the reasons explained above that Mr Robinson and Mr Johnston discussed and agreed on a 15-year lease in respect of the Service Station and the Workshop premises (if the Workshop Call Option were exercised) by options or otherwise, an option for Jigaroo to purchase the Workshop business (including leasing the Workshop premises) exercisable up to one year after completion of Jigaroo's purchase of the Service Station business (referred to as a "staged takeover"), and either aligning the terms of the leases of the Service Station and Workshop premises or converting them into a single lease if Jigaroo exercised the Workshop Call Option (assuming that it had an ongoing lease of the Service Station premises for a fixed term at that time). The terms of the SS Lease and the other documents executed by Jigaroo on or about 31 July 2018 were wholly consistent with those findings about what Mr Robinson and Mr Johnston had discussed and agreed.
It is common ground that Jigaroo became the owner of the Service Station business and the lessee of the Service Station premises on the terms of the SS Lease on 1 August 2018.
It will be recalled that the SS Lease expired on 31 July 2019. Jigaroo's option to renew that lease for a further term of five years commencing on 1 August 2019 was capable of being exercised on and from 1 May 2019 until and including 1 June 2019. The vendor finance for the Service Station business was repayable 1 August 2019, [10] which was also the last day on which Jigaroo was entitled to exercise the Workshop Call Option. [11]
Jigaroo took no step to exercise the option to renew the SS Lease at any time during the period from 1 May 2019 to 1 June 2019. Nor did Jigaroo purport to take any such steps at any time prior to March 2024. In his affidavit sworn on 28 October 2024, Mr Robinson deposed:
"52. Ever since Jigaroo purchased the Service Station business, it has been my understanding that Jigaroo has held a lease over the Service Station under the terms of the lease I signed on 31 July 2018.
53. My memory of every conversation I've had with Garry since 2018 is not perfect, and I do not now recall if I had any communications with Garry about renewing the lease in 2019 …
54. … during the renewal period in the lease of May to June 2019 I saw Garry almost daily each workday as he was working in the Workshop. I recall that Steve, Garry and I were working well together, Jigaroo was making its monthly interest and rent payments, and the Service Station business was not 'going under' like Garry's previous experiences. I do not now recall discussions with Garry about moving forward after the 12 month trial period ended but we must have had discussions with Garry or communicated with him in some way that we were moving forward with the Service Station purchase as Jigaroo continued to run the Service Station business and Garry was aware of this. Based upon my numerous discussions with Garry, he was well aware that if Jigaroo proceeded with running the Service Station after the 12-month trial period and proceeded to pay off the principal loan for the business Jigaroo would need the long-term lease options for the business to be commercially viable.
55. Further, I recall that around late July 2019, Steve and I discussed the possibility of purchasing and leasing the Workshop under the Call Option Deed with Garry. At that point, I recall that Jigaroo was interested in purchasing the Workshop but was having difficulties obtaining financing. At the time, Jigaroo was making profit from the Service Station but not enough to secure further financing or to pay the principal loan for the Service Station, and the company was still in the course of paying off the loan from Speedy Finance for the initial purchase of stock for the Service Station. I recall around about this time I asked Garry if he would agree to extending the option period into the future for the Workshop and that we would stay in constant communication about when we might be able to exercise it. I recall he said that he was fine with that. I recall at that time also telling Garry that Jigaroo was still trying to get funding and asking him whether he was still happy to continue for Jigaroo to continue to make interest only payments on the vendor financing for the Service Station. We discussed and agreed that Jigaroo could repay the principal on the purchase price at a later time when the Service Station was more profitable, enabling Jigaroo to obtain a loan for this purchase price. At that time, extending the option period as well as the repayment period for the vendor financing were tied together given it was always my understanding that we had agreed with Garry that Jigaroo would purchase and operate the Service Station and the Workshop as package. These conversations were consistent with my understanding that Garry was well aware that Jigaroo was renewing its lease for the Service Station.
56. Given the precontractual discussions I had had with Garry, I also understood these conversations in relation to extending the vendor finance arrangement and the option period as necessarily implying that the Service Station Lease would continue.
57. For the purposes of preparing this affidavit I have looked at the terms of the Service Station Lease. I see that the Lease provides for a renewal period of 1 May to 1 June 2019. I do not recall turning my mind in this period to expressly renewing the Service Station Lease in writing. As outlined above, because of the conduct and conversations between Garry and I, I always understood the parties were very clear in both the renewal period of 1 May to 1 June 2019 and up until the end of the first year of the lease on 1 August 2019 about the fact that Jigaroo was renewing the lease, and that neither party was exercising the agreed option to walk away after the 'trial period' … This is why I had the conversations with Garry in paragraph 55 above about the purchase of the workshop and the timing of paying off the purchase price for the Service Station.
58. At all times prior to April 2024, I understood that Garry had known and/or acted consistently with that position… At no time before April 2024 did Garry tell either me or Steve that he considered that the lease for the Service Station was not on foot or had not been renewed by Jigaroo after the trial period ended."
The italicised parts of paragraphs 52 to 58 of Mr Robinson's affidavit above were admitted into evidence subject to an order under s 136 of the Evidence Act limiting their use to evidence of Mr Robinson's state of mind.
Mr Johnston gave evidence that there was no "trial period", as I have found at [46]-[53] above, and deposed that there was no conversation between himself and Mr Robinson about Jigaroo renewing the SS Lease. Mr Johnston acknowledged that he agreed to extend the term of the vendor finance arrangement for the Service Station business, but could not recall having any discussion with Mr Robinson in July 2019 about Jigaroo proceeding with a purchase of the Workshop business. Mr Johnston denied that he had ever agreed to extend the period for exercise of the Workshop Call Option, although he did subsequently allow Jigaroo to purchase the Workshop business and enter into a lease of the Workshop premises in June 2021 on the terms of the sale contract and lease that had been annexed to the Workshop Call Option which had expired on 1 August 2019.
Mr Johnston gave the following account of his conversations with Mr Robinson in which he recalls that he agreed to extend the term of the vendor finance arrangement for the Service Station business:
"52. Sometime prior to the end of the first year of the lease of the service station and prior to the vendor finance period ending I recall having a conversation with Tristan.
53. It is my recollection that the conversation was outside the workshop. I said words to the effect: "Tristan can we have a chat about how you are going with the finance?"
54. Tristan replied with words to the effect: "Can we have talk after work."
55. We then met again after hours. His father may have been with him as well but I am not sure. To the best of my recollection the conversation was to the following effect:
Tristan: "Garry, we can't come up with the money for vendor finance now. Can we get an extension?"
Me: "How long are you thinking?"
Tristan: "About twelve months."
Me: "I will think about it."
56. I went away and thought about it. A couple of days later I approached Tristan. I can't recall if it was in the service station or the workshop. I said words to the effect: "Tristan I have thought about it and I am prepared to give you the extension."
57. He replied: "Thanks."
57. This extended to [sic] the term to August 2020."
In cross-examination, Mr Johnston gave evidence that these conversations occurred towards the expiry of the one year term of the vendor finance on 1 August 2019. Mr Johnston acknowledged that, at the time of those conversations, he knew that Jigaroo intended to continue operating the Service Station business. However, Mr Johnston denied knowing or suspecting that Mr Robinson was operating after 1 June 2019 under an assumption that the SS Lease had been renewed. In his affidavit sworn on 8 November 2024, Mr Johnston denied that he ever agreed to extend the period for exercise of Jigaroo's option to renew the SS Lease. It was his understanding that, as a result of Jigaroo's failure to exercise that option, Jigaroo was on a month-to-month lease on the same terms as the original SS Lease save that it was capable of being terminated by either party on one month's notice to the other. In the period after 1 August 2019, Mr Johnston wanted to increase the rent for the Service Station premises but received legal advice that he was unable to do so because Jigaroo had not exercised its option to renew the SS Lease and was merely holding over on terms that did not include any review of the rent. That advice is consistent with the terms of clause 12.4 of the SS Lease. I accept Mr Johnston's evidence that he raised with Mr Robinson on several occasions the fact that Jigaroo had not renewed the SS Lease, and reject Mr Robinson's denial of those conversations. It is inherently probable that Mr Johnston was keen to encourage Jigaroo to enter into a further long-term or fixed term lease, which would have given Mr Johnston the opportunity to increase the rent for the Service Station premises. Mr Johnston denied that he considered it would be advantageous to him to sell the Property without a lease in place in respect of the Service Station premises, and there is no evidence to support Jigaroo's theory that this was to Mr Johnston's advantage.
I reject Mr Robinson's evidence about the conversation in which he and Mr Johnston discussed and agreed extending the time for repayment of the vendor finance. As a matter of commercial reality, it is inherently improbable that Mr Johnston would have agreed to extend the repayment date until an unspecified time in the future when Jigaroo considered that it was sufficiently profitable. I accept Mr Johnston's evidence about that conversation.
I also accept Mr Johnston's evidence that there were no discussions at this time about renewing the SS Lease, or extending the time for Jigaroo to exercise the option to renew that lease. That is consistent with Mr Robinson's evidence in any event. The subjective belief that Mr Robinson says he had that the SS Lease was continuing on a long-term basis from 1 August 2019 is inextricably bound up with his evidence that the first year was a "trial period" after which the parties had an "option to walk away". I have rejected that evidence for the reasons explained at [46]-[53] above. For the same reasons, I reject Mr Robinson's evidence about his claimed subjective belief that the SS Lease was continuing on a long-term basis from 1 August 2019 as inherently improbable and unreliable. The only option available to be exercised in relation to the Service Station premises in 2019 was an option for Jigaroo to renew the SS Lease for a further term of five years, which would have included two further options to renew for further terms of five years. Jigaroo failed to exercise its option to renew during the renewal period of 1 May to 1 June 2019.
By late May 2021, Jigaroo had secured approval for a commercial loan of a sum sufficient to repay the Vendor Finance and to purchase the Workshop business for the price of $100,000 that had been stipulated in the contract for sale of business attached to the Workshop Call Option. As I have mentioned earlier in these reasons, Mr Johnston agreed to sell the Workshop business to Jigaroo at that price and on those terms. That transaction was completed in June 2021, and Jigaroo entered into a lease of the Workshop premises for a term of five years commencing on 11 June 2021, with two options to renew for further terms of five years each. There is no evidence that Mr Robinson raised with Mr Johnston at this time any question about aligning the term of the lease that he claims to have understood Jigaroo had of the Service Station premises with the term of the new lease of the Workshop premises. That is a further reason why Mr Robinson's evidence about his claimed belief that the SS Lease was continuing on a long-term basis after 1 August 2019 is inherently improbable.
On 27 March 2024, solicitors for Jigaroo, wrote to Hungerford Lehmann Solicitors whom they understood to be acting for Mr Johnston, asserting that Jigaroo had exercised the first option to extend the SS Lease in 2019 and indicating that it intended to exercise the second option in 2024.
Jigaroo's solicitors followed this communication up with a further letter dated 4 April 2024, which they subsequently forwarded to Mr Johnston's new solicitors, SP Walters Solicitors, by email on 10 April 2024:
"We act on behalf of Jigaroo holdings Pty Ltd who is the lessee of:
Lot 1/826791 part being 21 Main Street, Clunes and known as the service station; and
Lot 1/826791 part being 21 Main Street, Clunes and known as the workshop.
The lease for each part of the premises expires on 31 July 2024 and are subject to an option for renewal for a further period of five years each. We understand that the option to exercise the right is between 1 February and 1 May 2024.
We enclose notice of exercise of option of lease for both parts of the premises.
We additionally note that special condition 12 of the sale of business contract for the workshop noted the parties intention that the lease for each part run concurrently and or that one lease may be surrendered for a lease for the whole of the premises to issue.
Please advise whether your client would prefer to:
Continue with two separate leases which we have now renewed pursuant to the notice enclosed herewith; or
Grant a new lease in exchange for surrender of those leases for the whole of the premises.
Please confirm receipt of the notice of exercise of option for both leases."
The letter enclosed an unsigned document entitled "NOTICE OF EXERCISE OF OPTION" in the following terms:
"Jigaroo Holdings Pty Ltd ACN 621 195 515 the lessee of the premises known as:
Lot 1/826791 part being 21 Main Street, Clunes and known as the service station; and
Lot 1/826791 part being 21 Main Street, Clunes and known as the workshop;
gives you notice of exercise of its option of renewal for each lease over each part of the land for the workshop and service station severally and jointly pursuant to the terms of the lease/s and requests and requires you to grant it a renewed lease of the each part of the premises for a term of five years from the expiration of the term granted by the lease and subject to the covenants, agreements and conditions of the lease.
Dated: 4 day of April 2024
Jigaroo Holdings Pty Ltd ACN 621 195 515"
Mr Johnston's solicitors responded to Jigaroo's solicitors by letter dated 10 April 2024 in the following terms:
"We confirm that your client holds a lease over Part Lot 1/826791 being the premises known as service station (the 'Service Station Lease') and Part Lot 1/826791 being the premises known as workshop (the 'Workshop Lease').
The Service Station lease was entered into on 1 August 2018 and terminated on 31 July 2019. Your client did not exercise the option contained in the lease and has been on a month to month holding over since 1 August 2019. Your client no longer has a right to a further term under the Service Station Lease.
The Workshop Lease was entered into on 11 June 2021. The lease expires on 10 June 2026. This lease contains two options of five years each. The first date on which the first option for a further term may be exercised is 11 December 2025. Your client is not yet entitled to exercise its option for a further term of the Workshop Lease.
Copies of both leases are attached.
We confirm that the purported notice of exercise of option attached to your correspondence is not valid."
Jigaroo's solicitors replied by letter dated 21 June 2024, stating that:
"It is our client's firm position that the lease of the workshop is one and the same as the lease for the service station and that our client enjoys rights as the lessee of that premises pursuant to the terms of the lease described as being for the workshop. The period to exercise the option to renew that lease commences on 11 December 2025, as identified in your 10 April 2024 letter.
Your client cannot on the basis of the contractual documents between the parties maintain that the lease of the service station is not on the terms of the lease for the workshop, being that the lease term has not expired but is subject to an option to renew.
If that position were maintained by your client it would constitute a complete failure of the consideration due to our client for the purchase of both businesses, which purchases our client was induced to complete on the basis of your client's representations as to our client's tenure.
Please provide your client's undertaking that he acknowledges that the lease described as being for the workshop extends to and includes the service station. We require that acknowledgment to be provided within 21 days.
A failure to provide the above acknowledgment will leave our clients with no other option than to seek the intervention of the Court for a declaration that our client has the benefit of a lease over the part of the premises described as the service station. This may as we see fit include in the alternate a claim for damages including on the basis of misrepresentation and/or breach of contract. We will rely on this letter as to costs if proceedings are necessary."
It is not necessary to set out the terms of the response from Mr Johnston's solicitors refuting Jigaroo's contentions, or the subsequent correspondence between the parties' solicitors about the matters that are now the subject of these proceedings.
As I have mentioned earlier in these reasons, Mr Johnston entered into a contract on 25 October 2024 for the sale of the Property to Mac Corp. The completion date for that contract is 6 December 2024.
Jigaroo commenced these proceedings on 29 October 2024, more than four months after they had been foreshadowed in its solicitors' letter to Mr Johnston's solicitors dated 21 June 2024. [12]
The elements of conventional estoppel were articulated in the following terms by Brereton J (as his Honour then was) in Moratic Pty Ltd v Gordon, [21] which has subsequently been approved by the Court of Appeal on many occasions: [22]
"…. In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff …"
It is not necessary for the plaintiff to establish that the conduct of the defendant was the sole inducement operating on its mind. However, it is necessary for the plaintiff to demonstrate that it would have acted differently but for the alleged mutual assumption. [23]
Jigaroo bears the onus of proving each of the elements of the estoppels on which it relies.
I accept the submission made by counsel for Jigaroo that, as a matter of principle, a representation made or assumption induced by a defendant may found an estoppel notwithstanding that it is inconsistent with the terms of a contract subsequently entered into by the plaintiff and the defendant, although that inconsistency may present significant evidentiary difficulties for the plaintiff. [24] In each case, the question is whether the elements of the estoppel relied on have been established, starting with whether the plaintiff has proved the relevant representation or assumption on the balance of probabilities. In the present case, proof of the alleged Pre-Contractual Representations is also the starting point for determination of Jigaroo's misleading or deceptive conduct claims.
As I have found at [45] above, Jigaroo has established the alleged Term Representation. However, nothing turns on this. As I have recorded earlier in these reasons, counsel for Jigaroo conceded at the hearing that the alleged Term Representation did not give rise to any of the pleaded causes of action.
Counsel for Jigaroo also conceded that it could not succeed on any of its estoppel claims, or on its causes of action for alleged contraventions of the Australian Consumer Law, without establishing the alleged Trial Representation and/or the alleged Workshop Representation.
For the reasons explained at [46]-[53] above, Jigaroo has failed to establish the alleged Trial Representation. For the reasons explained at [46]-[53] and [66] above, Jigaroo has failed to prove the alleged Renewal Assumption.
For the reasons explained at [56] above, Jigaroo has also failed to prove the alleged Workshop Representation in the terms pleaded. As recorded earlier in these reasons, there are three elements of the pleaded Workshop Representation: (a) a representation that, upon purchasing the Service Station business, Jigaroo would obtain an option to purchase the Workshop business in a "staged process"; (b) a representation that, if Jigaroo acquired the Workshop it would have the benefit of concurrent leases, or a single lease, over both the Service Station and the Workshop premises; and (c) a representation that Jigaroo required a 15-year lease, exercisable by options or otherwise for both the Workshop and the Service Station premises. I have found that the discussion and agreement about Jigaroo's potential purchase of the Workshop business, and the lease or leases that the parties intended to enter into if Jigaroo proceeded with that purchase, were qualified by the assumption that a fixed term lease of the Service Station premises to Jigaroo would be on foot at the time of the exercise of the Workshop Call Option. That state of affairs did not eventuate by reason of Jigaroo's failure to exercise its option to renew the SS Lease, which it was required to exercise between 1 May and 1 June 2019. It follows that, by the time Jigaroo entered into the contract to purchase the Workshop business and the lease of the Workshop premises in about June 2021, the representation made three years earlier concerning the alignment of the terms of the SS Lease and any future lease of the Workshop premises (or, alternatively, the entry into a single lease of both premises) was no longer operative. Jigaroo has failed to prove all of the elements of the pleaded Workshop Representation.
For all of those reasons, Jigaroo's claims must be dismissed. It is not necessary to consider the other elements of the causes of action in estoppel and misleading or deceptive conduct, and time does not permit me to do so. Nor is it necessary to consider the submissions made on behalf of Mac Corp that the grant of the relief sought by Jigaroo in these proceedings would be futile because Mac Corp's equitable interest in the Property as the purchaser under the contract for sale of land dated 25 October 2024 would take priority over any equitable lease declared in favour of Jigaroo.
Miller Heiman at [45]-[49] (Macfarlan JA, McColl JA and Sackville AJA agreeing).
Wright v Hamilton Island Enterprises Ltd [2003] QCA 36, especially at [11]-[13] (McMurdo P) and [37]-[55] (Jerrard JA).
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Decision last updated: 03 December 2024