Kelrit Investments Pty Limited v Transform Composites Holdings [2003] FCA 662 | Case summary

What happened

Kelrit Investments Pty Limited owned an industrial site at 50 Clyde Street, Broadmeadows, Newcastle. Transform Composites Holdings occupied the main building under a four-year lease commencing 1 October 1996, with a five-year option from 1 October 2000 [4]. The lease's option clause required Transform to give at least three months' written notice if it wished to renew [14]. The fire-damage clause did not impose a mandatory obligation on Kelrit to rebuild [12]-[13].

A fire on 18 August 1998 substantially damaged several sheds in the main building [7], [28]. The central factual dispute was whether Transform's directors, Ralph Asquith and Brian Ness, promised that Transform would remain for the balance of the lease and exercise its option if Kelrit rebuilt the damaged area to Transform's specifications.

Finn J rejected the respondents' denials. He found that at a meeting on 7 September 1998 Asquith made the representation and offer, with Ness's knowledge. Transform wanted the replacement building to accommodate its business requirements, including a high clearance and a proposed five-axis machine [102]. Kelrit then rebuilt. Transform participated in design discussions and supplied input on the building's requirements [103]-[104].

By November 1999, Transform said its plans had changed and it would not exercise the option [68]-[72], [108]. Kelrit claimed damages for breach of contract, damages under ss 52 and 82 of the Trade Practices Act 1974 (Cth), and equitable compensation [9]. Claims against Asquith and Ness included accessory liability under s 75B of the Act and a claim under s 42 of the Fair Trading Act 1987 (NSW) [9].

The Court found a binding oral contract and misleading or deceptive conduct. It also found that Asquith and Ness were knowingly concerned in the contravention [112], [120], [182]. It assessed two alternative damages amounts, $406,402 for contract and $5,000 under s 82, but made no final damages order. Because the remedies were inconsistent, Kelrit was directed to elect and provide proposed minutes of order within 14 days [121], [183].

Why the court decided this way

Credibility was decisive. Finn J described Asquith as unreliable and found that his later affidavit about a conversation concerning the lease was “calculatingly deceptive” [90]. He considered Ness's evidence unreliable on strategic matters and not independent corroboration of Asquith [91]. By contrast, he accepted Renee Hawkins as a conscientious witness and considered Clive Hawkins truthful despite aspects of his evidence being unreliable or coloured by his personal perspective [88]-[89].

The Court drew a careful distinction between the early post-fire discussions and the meeting on 7 September. The earlier exchanges created expectations and reassurance but did not, in Finn J's view, establish a clear and unqualified commitment [95], [98]. At the 7 September meeting, however, the Hawkins' evidence established a specific conditional promise: Kelrit would rebuild to Transform's requirements, and Transform would exercise the five-year option [102], [112].

The subsequent conduct supported that account. The Court accepted evidence that Asquith played a substantial role in the building's design and gave instructions about its specifications [104]. The building was therefore being developed for Transform's requirements in circumstances consistent with the promise. Finn J found Kelrit rebuilt because of the representation and offer, rather than simply because it received legal advice about its obligations after the fire [103].

The contract analysis treated the rebuilding as the requested performance. Applying Beaton v McDivitt, Finn J explained that a promise may request an act or the fulfilment of a condition, and that doing the requested act in reliance on the promise will usually provide consideration [114]. On his findings, Kelrit performed the requested act and the oral contract was formed.

Transform argued that the oral contract was ineffective under ss 23C and 54A of the Conveyancing Act 1919 (NSW). Finn J accepted the approach taken in Baloglow v Konstanidis. The oral agreement was executory, so s 23C did not apply. It also did not vary the existing option or dispose of an interest in land for s 54A purposes. The lease continued to define the option and the lessor's obligation to grant a renewal; the oral agreement committed Transform to exercise the choice it otherwise had [118]. The Court therefore rejected the writing objection without needing to decide the alternative estoppel argument [119].

For the Trade Practices Act claim, the respondents accepted that if the representation was made, it was misleading or deceptive because they had no intention at the time of exercising the option [120]. The Court found Kelrit relied on it. For damages under s 82, it applied the counterfactual comparison described in Marks v GIO Australia Holdings Pty Ltd: the actual position was compared with the position Kelrit would have occupied but for the contravening conduct [168].

Finn J found that, absent the representation, Kelrit would have sought a cash settlement from its insurer rather than rebuild. He assessed the likely settlement at $630,000, taking account of the estimated reinstatement cost and the discount the insurer would likely have negotiated [146]-[147], [167]. The calculation also accounted for the steel payment, remediation costs, rental income, interest savings, taxation and property value [169]-[179]. Those benefits substantially reduced the reliance loss.

Before and after state of the law

The judgment applied existing authorities rather than announcing a new general rule. For consideration, Finn J relied on Beaton v McDivitt for the proposition that performance of an act requested by a promise will usually constitute consideration [114]. The case applies that reasoning to a landlord's rebuilding of premises after a tenant's conditional promise to exercise a lease option.

On the statutory writing question, the Court followed the New South Wales Court of Appeal's approach in Baloglow v Konstanidis [118]. Finn J distinguished the concern drawn from Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd about whether a variation of a contract subject to writing requirements must also be written. His analysis was that the oral promise did not vary the option: it bound Transform as to how it would exercise the choice under the existing lease [116]-[118].

The reasons also refer to equitable estoppel authorities, including Walton Stores (Interstate) Ltd v Maher and Austotel Pty Ltd v Franklins Selfserve Pty Ltd [117]. But Finn J expressly left the estoppel questions undecided because his contract and statutory analyses resolved the relevant issues [119]. It would therefore overstate the decision to describe it as a ruling that estoppel defeats the Conveyancing Act writing requirements.

For statutory damages, the judgment applies the counterfactual comparison associated with Marks v GIO Australia Holdings Pty Ltd [168]. For inconsistent remedies, it applies Port of Melbourne Authority v Anshun Pty Ltd and Tang Man Sit v Capacious Investments Ltd in requiring an election before judgment [121]. The judgment itself does not establish what the law was before these authorities or how the law developed afterwards. It records how Finn J applied them in 2003.

Key passages with plain-English translation

At [114], Finn J describes a promise made in exchange for another party's requested performance. In plain English, a promise can be supported by consideration where the recipient does what the promisor asked them to do, in reliance on the promise. In this case, the relevant act was rebuilding the premises to the tenant's requirements.

At [118], Finn J says the oral contract “fettered” the tenant's existing choice. In plain English, Transform still had an option under the written lease, but it separately promised Kelrit how it would use that option if Kelrit rebuilt. The Court viewed that promise as a commitment about the exercise of an existing right, not as a new grant or variation of the land interest.

At [119], Finn J calls the facts a possible “quintessential” case of equitable estoppel, but says he need not decide the issue. The practical significance is limited: the Court's decision rests on its contract and statutory analysis, not on a final estoppel ruling.

At [168], the Court explains that s 82 damages require comparing actual and counterfactual positions. In plain English, the calculation is not simply the cost of the rebuilding or the amount of a promised lease. It asks what Kelrit actually received or spent, then compares that with what it probably would have received, spent or saved if the representation had not been made.

At [178], Finn J explains why the statutory damages figure was modest. The steel payment, rental receipts, savings and other advantages reduced the loss on the counterfactual measure. The Court considered the larger expectation loss to be associated with the contractual claim, not the reliance-based statutory comparison.

What fact patterns trigger this precedent

The decision is most relevant to disputes where a party makes a conditional promise that induces another party to perform a substantial act, and the promisor later seeks to resile. Here, the lessor was asked to rebuild a building to the tenant's specifications, and the tenant promised to exercise a lease option in return [102]-[104], [112].

It is particularly relevant where the promise concerns a party's future exercise of a right already created by a written agreement. The distinction between varying the underlying right and making a separate commitment about how to exercise it was central to the Court's treatment of ss 23C and 54A [116]-[118]. The decision does not establish that every oral agreement about a lease option will avoid those provisions. Its analysis depended on the terms and operation of the particular lease and oral agreement.

The damages discussion may be relevant where misleading conduct causes a claimant to choose one course over another, and the claimant alleges that it lost the benefit of the alternative course. The counterfactual must be supported by evidence and account for relevant receipts, costs, savings and benefits [167]-[179]. In this case, the likely insurance settlement was estimated rather than an amount actually offered and accepted [142]-[147].

The decision also addresses cases where contract damages and statutory damages are pleaded in the alternative but cannot both be recovered. The Court assessed both measures so that Kelrit could make an election, but it did not award both [121], [183].

How later courts have treated it

The supplied judgment does not discuss decisions made after 3 July 2003, so it cannot establish how later courts treated Kelrit Investments Pty Limited v Transform Composites Holdings Pty Limited. No later cases or subsequent appellate history are identified in the text.

Within its own reasoning, the decision applies and distinguishes earlier authorities. It applies Beaton v McDivitt on consideration by requested performance and Baloglow v Konstanidis on the Conveyancing Act writing provisions [114], [118]. It distinguishes the relevance of Tallerman to a variation, on the basis that the oral agreement did not vary the option itself [116]-[118]. It also applies authorities on inconsistent remedies and counterfactual statutory damages [121], [168].

The judgment therefore supplies a factual application of those principles, but the provided text does not support any claim about whether the decision has been followed, distinguished, criticised or limited later.

Still-open questions

Finn J did not decide the equitable estoppel issue. He observed that the facts appeared to present a strong example, but considered it unnecessary to determine whether Transform was estopped from relying on the writing provisions or resiling from its promise [119]. The judgment consequently does not settle the relationship between estoppel and ss 23C or 54A in a case where the statutory argument is decisive.

The case also leaves open how the writing provisions would apply where an oral agreement actually changes the terms of an option, creates a new interest in land, or changes the lessor's obligations. Finn J's conclusion depended on his characterisation of this agreement as an executory promise that committed Transform to exercise an existing option without altering it [118].

The damages assessment depended on the evidence of what Kelrit would probably have done with its insurance claim. The Court found a likely cash settlement of $630,000, using an estimated reinstatement cost and an assessed discount [146]-[147], [167]. The reasons do not establish a general method for valuing a hypothetical settlement where the insurer's position, the insured's financial circumstances, or the available repair options differ.

Finally, the Court assessed but did not finally order either damages figure. The ultimate remedy depended on Kelrit's election, and the reasons do not record what election or final orders followed [121], [183].

This is general legal information, not legal advice. Zoe can make mistakes. Before acting on this, relying on it, or using any draft, have a qualified Australian lawyer check it.

REASONS FOR JUDGMENT The Parties 1 The applicant, Kelrit Investments Pty Ltd ("Kelrit") was incorporated for the purposes of a family business in 1983. Though it diversified over time its core business was that of fibreglass moulding and manufacturing this being conducted at premises it owned at 50 Clyde St, Broadmeadows in Newcastle. By 1990 that part of its business was carried on under the name "Transform Composites". In 1994 it was sold by Kelrit to the first respondent, Transform Composite Holdings Pty Ltd ("Transform") as a result of a management buyout proposal put by the second and third respondents, Ralph Asquith and Brian Ness who were respectively, a director and the managing director of Transform. 2 From about the time of the sale to Transform the directors and shareholders of Kelrit were the founder's children, Clive Hawkins, Renee Hawkins and Chris Hawkins. The 50 Clyde Street Property 3 This property was bought by Kelrit in 1988 for $2.2 million. It contained a number of industrial buildings which were divided into discrete areas which were referred to as "sheds". The largest of these ("the main building") was a saw toothed structure built in the early 1900s which housed shed 9, 11, 11A, 11B, 12, 13A, 13B, 13C and 13D. 4 In August 1998 Transform leased the main building from Kelrit under a four year lease commencing 1 October 1996 with a five year option from 1 October 2000. Transform had previously occupied the premises under shorter term tenancies. 5 When Kelrit purchased the site in 1988 the purchase included the dismantled steel frame of an open portal building. That frame is of some significance in this proceeding. 6 In September 1989 substantial damage was done to the Clyde Street property by the Newcastle earthquake. Kelrit's insurance claim for damage suffered resulted in a cash settlement with its insurer. The Present Claim 7 Parts of the main building (sheds 13A, 13B, 13C and 13D) were substantially damaged by fire on 18 August 1998. Kelrit's case is that, shortly after the fire, both Mr Ness and Mr Asquith represented and offered to Kelrit (though Clive and Renee Hawkins) that if Kelrit rebuilt the damaged part of the main building to the specifications and to meet the requirements of Transform, Transform would remain in possession of the premises for the balance of the term of the lease and would exercise the option. 8 Kelrit, relying it is said upon the representations of, and its contract with Transform rebuilt the main building as required by Transform. In late November 1999, Transform indicated it had no need for the premises and would not be exercising the option. It vacated the premises at the end of September 2000 on the expiration of the lease. 9 Kelrit's claims against Transform are (i) for damages under s 82 of the Trade Practices Act 1974 (Cth) ("the TP Act") in respect of a contravention of s 52 of that Act; (ii) for damages for breach of contract; and (iii) for compensation in equity. The claims against Mr Asquith and Mr Ness are under the accessory liability provisions of the TP Act (s 75B) and under s 42 of the Fair Trading Act 1987 (NSW). 10 To foreshadow what follows, Mr Asquith and Mr Ness deny making the representations and offers on which Kelrit's claim is based. I have not accepted their denials. 11 There is a substantial dispute between the parties as to whether, in the event of a contravention of the TP Act or a breach of contract being found, Kelrit actually suffered loss and damage. I will consider separately the questions of contravention/breach of contract and of damages. Transform's lease 12 There are only two parts of the 1996 four year lease to which it is necessary to refer. First, clause 4:03 (as varied) made provision for the respective rights and obligations of the lessor or lessee in the event of destruction or damage in whole or in part of the leased premises by fire. A proviso to that clause stipulated that if such destruction or damage occurred, then: "if the demised premises shall not be rebuilt or made fit for the occupation and use of the lessee or shall not become accessible to the lessee within six (6) months of the date upon which such destruction or damage or such inaccessibility shall have occurred then at or after the expiration of such period either party may determine this lease by giving written notice of cancellation to the other party." 13 What I would emphasise is that this provision imposed no mandatory obligation on Kelrit to rebuilt in the event of total or partial destruction of the main building by fire. 14 The lease provided for an option to renew for a further five years in the following terms (insofar as presently relevant): "If the Lessee shall desire to take a renewed lease of the demised premises from the expiration of the term of this Lease for a further term of [five] years … and shall give to the Lessor not less than three (3) months notice in writing thereof … the Lessor shall at the cost and expense of the Lessee grant to the Lessee a lease of the demised premises for the same further term … PROVIDED HOWEVER that the granting of a renewed Lease pursuant to the option herein contained is dependant upon the exercise of the option in the manner herein provided …" Factual Setting 15 The applicant's case is founded on a number of discussions and communications between one or other or both of Clive Hawkins and Renee Hawkins on the one hand and Mr Asquith and Mr Ness on the other. The substance of these discussions and communications is contested by Mr Asquith and Mr Ness as, in some instances, is the occurrence of them. The issue of credibility looms large in all of this. 16 Before detailing those discussions in their context it is necessary to refer to several matters by way of background.

Background 17 The fibreglass moulding and manufacturing business acquired by Transform from Kelrit in October 1994 was that of a contract manufacturer for specific works. At the time of the management buyout it had six main contracts. The majority of these were with Goninan & Co Pty Ltd ("Goninan") and related to the Tangara train contracts that had been let by the New South Wales Government and were nearing completion. 18 The initial lease taken of the 50 Clyde Street property in October 1994 was for one year with an option to renew for one year. In mid-1995 Transform was awarded a further contract by Goninan that was scheduled for completion in 2000. 19 During 1995 negotiations for a new lease with Kelrit commenced. A number of interim arrangements were made while they progressed. They resulted in a four year lease which governed the parties' relationship at the time of the fire. 20 It is Mr Asquith's evidence that from 1996, Transform continued to operate profitably. Its business remained that of a contract manufacturer but was diversified by securing some non-rail contracts and rail contracts other than with Goninan. In late 1996 Transform entered into a joint venture agreement with Steven Mitchell. Between 1994 and 1996 Mr Mitchell has built a machine known as the "five axis machine". It was used for the automated cutting, shaping and sanding of patterns to make moulds used in the manufacture of fibreglass products including power boats. 21 At the time of the fire the five axis machine was being operated by the joint venturers at a Goninan building near to 50 Clyde Street. It is Mr Mitchell's evidence that the size of that building limited the utility of the machine. A roof clearance of eight metres or more was needed for it to be fully used. He also indicated other specific requirements or desirable features of a building to house the machine. 22 According to Mr Mitchell, a number of weeks after the fire he had a conversation with Mr Asquith in which it was indicated that Mr Asquith and Mr Ness were planning to move the joint venture to 50 Clyde Street. He also gave evidence of discussions he had with Mr Ness and Mr Asquith in late 1998 concerning the dimensions and details of construction of the proposed new building at Clyde Street and specifically what was desirable for the purposes of accommodating the five axis machine. He had been told that the dismantled steel portal frame building that had been purchased by Kelrit in 1988 would be used in the construction as "it will give us the height needed". 23 The joint venture came to an end in about February 1999. It was Mr Ness' evidence that the joint venture constituted less than 5 percent of Transform's business. 24 The actual financial position of Kelrit at the time of the fire cannot be stated precisely given the evidence on this matter, the more so as Kelrit was only one of an unstated number of companies through which the family business seems to have been conducted. The relationship between these companies, particularly in respect of guarantees inter se, is quite unclear. 25 It is clear that while relatively speaking Kelrit was asset rich, it carried debts at mid-1998 in the order of $900,000 though only about half of this amount was recorded in its balance sheet as a current liability. Kelrit's only real source of income at the time, according to Ms Hawkins came from rentals on the 50 Clyde Street property, and about 90 per cent of that income came from Transform's rent. Transform's monthly payment as at August 1998 was $24,500 per month. 26 Renee Hawkins view was that "Kelrit's financial position at the time was precarious and I felt that the company's debt was costing too much to service". Her own wish prior to August 1998 was for Kelrit to sell its properties, retire its debts and divide what remained amongst the three shareholders. Kelrit had been looking to sell the Clyde Street property from 1996 and continued to do so throughout the period of present relevance. At the time of the fire a program of asset sales to retire debt was being implemented. 27 Ms Maybury, an accountant who was called by Kelrit to give expert evidence, ventured the opinion that the company was financially unstable (a view derived from Kelrit's balance sheets for 1996 and 1997) and that it would have difficulty as at 30 June 1998 in repaying its current liabilities over the next twelve months. Her evidence in this, though, needs to be treated with some caution given that some assumptions she made in expressing this opinion may be lacking a factual foundation.

Rental adjustment required is as follows: Total floor area (inclusive of mezzanine level) 7728 M2 Fire Damaged Area 1490 M2 Fire Damaged Area - % of total 19.28% Total Rent/Month $24500 Rent Decrease Required $24500 x 19.28% $4723.60
Transform will rent Shed 8 and adjoining yard space for the next six months at $3000 per month. Please have a lease agreement drawn up and forwarded to me.
Shed 3 will be cleaned out and made available to store items previously stored in shed 8.
Transform will endeavour to keep paying full rent of $24500 per month for the next six months and an adjustment will be made after that date to reflect the above changes. Hopefully by this time the loss of rent insurance will have been paid.
We would like to liaise with Kelrit to determine the type of building structure used in the building reconstruction. Please do not hesitate to contact me should you require any further information." Emphasis added. 38 Transform highlights the absence of any reference in this to exercising the option to renew. (d) 20 August meeting (Ness) 39 Both Mr Ness and Mr Asquith depose to a meeting between Clive Hawkins and Mr Ness (with Mr Asquith standing nearby) at which (i) Clive Hawkins is said to have indicated he was considering using the dismantled steel portal frame to rebuild the destroyed building and (ii) Mr Ness indicated that Transform would like to ensure that the building was suitable for its future needs. 40 It is Clive Hawkins' evidence that this "conversation simply did not happen". He denies suggesting to Mr Ness that the steel frame be used for rebuilding and contends that it was suggested by Mr Ness at a meeting on 7 September 1998 (below). (e) Late August meeting: Clive Hawkins - Asquith 41 In his first affidavit Clive Hawkins referred to the following conversation with Mr Asquith in late August: "Me: "We're still thinking of taking a cash settlement on the building insurance." Asquith: "You can't do that. We've had legal advice to the effect that you're obliged to put up a new building. You had better get some advice."" 42 Mr Asquith made no reference to this conversation in his affidavit filed prior to the commencement of the trial. He swore a second affidavit on 13 March 2003 after he had heard the evidence both of Clive and of Renee Hawkins. That evidence is said to have "refreshed" his recollection and he recalled the details of a conversation with Clive Hawkins in late August or early September. The affidavit contained the following: "3. It was a short conversation. My recollection of this conversation is that it included an exchange to the following effect: Hawkins: "I am thinking of taking a cash settlement." Me: "My understanding is that you are obliged to rebuild under the lease otherwise we have the option to terminate the lease. But if you rebuild, then we are obliged to continue the lease." Hawkins: "Are you prepared to exercise the option under the lease if we rebuild?" Me: "I can't guarantee that." Hawkins: "What else is in the lease?" Me: "You need to see Paul Trisley and get some advice." 4. I do not now recall whether I discussed the above exchange with Brian Ness or not. I would usually discuss such matters with him. 5. I also now recall that I looked at the lease in preparation for any meeting with Clive Hawkins on 19 August 1998." 43 In cross-examination on 13 March 2003 Mr Asquith indicated he had not taken legal advice in relation to the obligation to rebuild. He just read the relevant clause himself and he understood that there was not any absolute obligation to rebuilt the building. The following day in cross-examination he accepted that he had said to Clive Hawkins in late August that "We've had legal advice to the effect that you are obliged to put up a new building". He denied this later statement was false. He said the legal advice was received in 1996 when they were going through the lease with their solicitor. His recollection of that advice was to the same effect as his "plain reading" of the relevant clause of the lease. 44 Kelrit has submitted that Mr Asquith's second affidavit is a fabrication. (f) 7 September 1998 meeting 45 This is the principal meeting relied upon by Kelrit in both its TP Act and contract claims. It was held in Transform's offices and was attended by Mr Asquith, Mr Ness, Mr Hawkins and Ms Hawkins. Each gave their own account of the meeting. 46 According to Mr Hawkins, the following exchanges occurred: "Asquith: We want you to put up a new building to take the five axis machine. We will then move our joint venture with Steve Mitchell on site. The machine needs a lot of space to operate and we will need a suitable crane installed. Clive Hawkins: We need to make a decision. We're starting to get pressure from the insurers to move things along. We're happy to help you but we need a long term commitment. Can you give us the exact configurations of the building you want?" 47 Mr Ness then produced (and signed and dated) a diagram of the building that was desired. He went on to describe it. It required an eight metre clearance. The dismantled steel frame building on the site could be used for such a purpose. After Mr Ness had spoken, Mr Hawkins recounted the following occurring: "Clive Hawkins: That's fine - just so long as you're prepared to take up the 5 year option on your lease. Asquith: We don't have a problem with that. Ness: It would be nice to have that type of steel frame building because of the cranage that it would allow. The advantage of using the steel frame is that we will be able to install heavier cranage if need be in the near future. The other advantage of using the steel frame is that it is already on site. We need to get it up as soon as possible as we don't want to incur penalties on our contracts. Asquith: If we bring the joint venture onto the premises, we will basically have our whole operation on the one site which will allow us to have greater supervision of the work. … Clive Hawkins: You're happy with this? If we give you this with our steelwork, you'll be happy with that? Ness: Yes Clive Hawkins: Fine. We can finally get things moving. We'll be able to tell Strath Castle and Alan Turner what we want. We can get things underway. We can give you exactly want you want, so long as you exercise the 5 year option - we could have difficulty leasing this kind of building to anyone else. Asquith: We don't have a problem with that." 48 Renee Hawkins account was in the following terms: "Asquith: Clive's told you that we want you to build a new building on the site. Our joint venture with Steve Mitchell uses this machine to make the fibreglass moulds. It requires a lot of space to operate. We want to get the machine off the Goninan Platers site because the building there isn't big enough. We want about 8 metres clearance, we also want a purpose built crane. A diagram was then handed over. Ness: This is the building what we want. We can use your dismantled steel frame for the building in the construction. You could do a deal with the insurance company to use it. You could raise it to the required height on the existing concrete pylons. Clive: We'll need to get advice on this and let you know our decision. Asquith: I'm going away on holidays in the next couple of weeks and I'd like to know where we're up to before I leave. Clive: We'll do our best. We're at the point where we need to make a decision. We're happy to help you, but we need a long term commitment here. We're not going to put up a building like that if you're not prepared to at least exercise your option under the lease. If you leave the site, it would be hellish to try and lease a building like that. Asquith: We've got plenty of work on at the moment and plenty of upcoming contracts. We have the joint venture with Steve Mitchell. We're in the box seat for the Fourth Generation Train contract. It doesn't matter who wins the principal contract; we'll get the sub-contract work from them. We intend to have a long term relationship with you as tenants, but we need this building. Clive: That's all well and good, but we're not going to put up a building and have you turn around and say you don't want it. Asquith: That won't happen. Clive: We'll think about it. If we build, we want you to exercise the option. Asquith: Yes, yes, we understand that. Clive: We are thinking of taking a cash settlement on the insurance. It would be good to pay off part of our mortgage. Asquith: You have to put up a building under the lease anyway. It may as well be the one we want. Clive: Well, maybe we don't have to. We'll need to get advice on that. Maybe we could reduce our mortgage." 49 Mr Asquith's account of the meeting was that it addressed (a) Transform's receipt of a structural report on the building and safety measures undertaken; (b) a sketch Mr Ness created of a building which incorporated steel framework which Kelrit wished to use to create a replacement building; and (c) the lease of shed 8. There was no discussion of long term leases, of renewal of the option, or of the fourth generation train project. 50 Mr Ness' account was to similar effect. He stated that his recollection was that there was no discussion of (a) Transform staying at 50 Clyde Street after the end of the lease or making a commitment to do so; (b) Kelrit taking a cash settlement as an alternative to building; or (c) a specific plan to move the five axis machine into the building. (g) Ms Hawkins and Mr Asquith 51 Ms Hawkins' evidence is that about a week after the 7 September meeting she visited Mr Asquith's office and had a conversation to the following effect: "Ralph: "Have you come to a decision about the new building yet?" Me: "No, not yet. We can't just put up a new building unless you're going to be here. We need to get advice on that." Ralph: "Yes, we will. Yes, we understand that." Mr Asquith had no recollection of this meeting. (h) The Hawkins meet Paul Trisley 52 Both Mr and Ms Hawkins gave evidence that they saw their solicitor in late September or October 1998. It was after that meeting that they decided to rebuild the destroyed part of the Clyde Street main building. Mr Paul Trisley is now deceased. A file note of his has been produced which confirms that a meeting occurred but is not on its face clear as to the date. I should indicate in passing without recounting the evidence on the matter, that I am satisfied that the note was probably created in September or October 1998. The note itself is not completely decipherable. It does refer to "reconstruction". I am not, for reasons of illegibility, prepared to find (as the applicant presses on me to do) that the note records the following: "reconstructed on their representation that they would continue the lease". 53 Both Clive and Renee Hawkins gave evidence that Mr Trisley was told that Transform had agreed to exercise its option if Kelrit rebuilt. In cross-examination Renee Hawkins indicated that at the time they went to see Mr Trisley, she considered that Transform was obliged to exercise the option: "I saw that as more or less a verbal contract, if you like, that that is what was going to happen come that date". 54 The decision to rebuild was, to Mr Hawkins, the "common sense option" suggested by Mr Trisley of putting up the building "required by Transform". (i) The 26 October telephone conversation: Ness - Clive Hawkins 55 In his affidavit Mr Ness recounted a telephone conversation with Clive Hawkins concerning the rebuilding in which the installation of sprinklers was discussed, that subject being related to the availability of insurance. Mr Ness deposes that he said: "Our likelihood of taking up the option on the lease is unlikely if the sprinklers don't go in." 56 In cross-examination and prior to having his attention drawn to this passage Mr Ness denied categorically that the subject of the option had ever come up in conversation between himself and Mr Hawkins and Ms Hawkins. He went so far as to say: "I'm clear on that". 57 Clive Hawkins has denied that Mr Ness made any comment to him concerning the option of the character deposed to by Mr Ness. 58 Mr Ness produced what he said was a contemporaneous note of his conversation of the 26th. That note made no reference to the option or to the likelihood of it being taken up. However, it recorded the following: "I said if no sprinkler system installed we would be uncomfortable [with] new long term lease - in case insurance becomes a problem after 1 year (5% likelihood according to Allan Turner). Clive didn't seem concerned by this." The veracity of this note is in issue. (j) Design and Construction of the new building 59 After the decision to rebuild was taken, Clive Hawkins spoke to Strath Castle, the loss adjuster. He informed him that Transform had indicated the kind of building it wanted (including the eight metre ceiling) and that the dismantled steel frame was to be used. Mr Castle in turn engaged an engineering company to be the principal engineer for the project. Mr Compton of that company engaged a civil engineer, Paul Clarke to handle both the structural aspects of the demolition work to be done and to prepare the plans for the replacement building. 60 Between September and December 1998, Mr Clark worked on the design of the building, meeting with Mr Asquith at site inspections on "numerous occasions" and having numerous conversations with him concerning the design of the building. In his affidavit Mr Clarke listed a range of matters relating to the design of the building (including height and use of the steel frame) on which Mr Asquith provided him with instructions. 61 On 7 December, Clive and Renee Hawkins attended a meeting with Mr Ness and Mr Asquith to discuss details for the proposed steel frame building. This was followed by a second meeting on 10 December which was attended as well by Mr Clarke, Mr Compton and several others. The purpose of the meetings was to agree matters so that instructions could be given to finalise the plans. Both Ms Hawkins and Mr Clarke have given evidence that Mr Asquith gave almost all the instructions and details relating to design matters. This second meeting was the first occasion on which Mr Clarke met Mr and Ms Hawkins. Ms Hawkins kept records of both meetings. It is accepted by the applicant that no mention of the option was made at either meeting. 62 Mr Asquith's evidence is that at each meeting Transform's input was essentially limited to matters such as lights, windows and water supply. 63 Detailed drawings were then prepared by Mr Clarke and building and development applications were lodged with the Newcastle City Council on about 21 January 1999. Development approval was received on 7 May 1999 and construction commenced almost immediately (a tender having previously been selected). (k) February 1999: Asquith and Ness 64 It is Mr Ness' evidence that in February 1999 it had been decided that "we had no need for the building which was being constructed by Kelrit". The reason given for this was that, since September 1998, Transform had not been awarded any significant contracts. He described a conversation with Mr Asquith as to whether they should terminate the lease because rebuilding would not be completed within six months. It was decided to stay on and to sublease the building. Mr Asquith is recorded as saying he would let Kelrit know what they were doing. Mr Asquith agreed in cross-examination that while sub-leasing of the building was raised with the Hawkins at a meeting in June 1999, it was not indicated to them until November 1999 that the building was neither needed nor required by Transform. (l) The June meeting 65 By mid-June 1998 the construction of the building was well advanced, according to Mr Hawkins. At Mr Asquith's request a meeting was held with at least Clive and Renee Hawkins around this time. There is inconsistent evidence as to whether Mr Ness was there. Both of the Hawkins deal with this meeting in their affidavits. Neither Mr Asquith nor Mr Ness do. 66 The Hawkins' evidence in substance was that Mr Asquith told them the joint venture with Mr Mitchell involving the five axis machine was not going ahead; that they would not need the building for that purpose; and that they would like to sub-lease it for a short term. He indicated, nonetheless, that they had a lot of work and would want to use the building in the future. 67 Mr Asquith in cross-examination indicated he could not recall most of what was discussed, although he could recall that the Hawkins had no problem with Transform sub-leasing the building. (m) The 23 (or 24) November telephone conversation: Asquith - Ms Hawkins 68 Ms Hawkins gave evidence that she was telephoned by Mr Asquith on about 23 or 24 November 1999 and that Mr Asquith said to her words to the effect: "Can you come over to our offices and meet with Brian and I to discuss us taking up a new lease? We're not really interested in taking up an option for another five years. Our plans have changed. We've had no success in sub-leasing the building and we'd like to make an alternative offer. Can you come alone because I don't want Clive to be present. I know what his reaction will be and I'd rather be able to discuss this in a business-like fashion without heated discussion. You can discuss it with Clive and then get back to us." 69 Mr Asquith acknowledged that he did call Ms Hawkins, and in his affidavit he did not dispute any part of her account of the conversation. In cross-examination he said he could not recall what was said. (n) The 26 November meeting 70 Ms Hawkins met with Mr Asquith and Mr Ness at Transform's offices on 26 November 1999. Her account of their conversation was as follows: "Ralph: "Our plans have changed. The joint venture has fallen through and it doesn't look as though we're going to need to use the building. We've had no luck in sub-leasing it. We've made enquiries with other sites and it looks as though we can get a better deal elsewhere. We've been speaking to Lanes about leasing the premises a couple of doors down from here at a much lower rent. On top of that, they've offered us six-months free rent if we move in there. You'd be aware that there's a lot of industrial property for lease at the moment and we have been sending out letters to find out about alternative premises." Me: "Oh, my god. Well, look, I'll talk to Clive for you. I'll do the best I can. You're our major source of cash flow. We've built this building for you, and now this will really affect our cash flow. Clive's not going to be happy about it. You said you were going to stay on here and that you had future plans at the site. I can't believe you're thinking about moving elsewhere. We're relying on you." Ralph: "We wanted the building before, but plans change."" At this point, Ralph handed me a copy of the letter that Transform had apparently been forwarding to prospective landlords. Ralph: "We've leased a site at Cardiff near Clyde Engineering to carry out the Fourth Generation Train project, which we won. It is cheaper for us to have the operations at one premises and not to have to pay transportation costs. We plan to do a similar thing with our work for our Victorian contract." Me: "You've been good tenants in the respect that you've always paid on time and we don't want to lose you as tenants. I'm not sure what our position is, but I'll speak to Clive and get back to you as soon as I can."" 71 Mr Asquith's account of the meeting was in the following terms: "The meeting was short. In the course of it there was an exchange to the following effect: Me: Our lease of this premises expires on 30 September next year. We have put out a fax to various real estate agents and landlords to see what is available in the market. This is a copy of our standard fax. I'll send you more details about what we'd like for the existing building. Could you think about it and get back to me as soon as you can with what you are prepared to do. Renee:I'll have to talk to Clive about it. I do not recall talking to Renee Hawkins about the new building individually, or a joint venture, or plans changing, or a lease at Cardiff (there has never been such a lease). I considered the 1996 lease covered all buildings both new and old. I did refer to a site at 56 Clyde Street that we were investigating. I recall Renee did not say anything to the effect of: (a) "we've built this building for you", or (b) "you said that you were going to stay on here and that you had future plans at the site. I can't believe that you're thinking about moving elsewhere. We're relying on you"." 72 Mr Ness' evidence was to like effect. (o) Later Negotiations 73 On 29 November Mr Hawkins wrote to Ms Hawkins confirming that Transform was currently investigating building lease alternatives. The letter outlined what were Transform's requirements by way of space, rent, and duration of lease should it remain at 50 Clyde Street. It was further indicated that Transform wished to make a firm decision by the end of the year and sought a response from Kelrit as soon as possible should it wish to consider Transform's proposal. 74 Ms Hawkins, who said that at this time she was "essentially in damage control trying to salvage what [she] could from the situation", prepared a counter-offer for Transform. It stated (in part): "As Transform Composites no longer requires the new Shed 13 building which was erected specifically to your requirements and on your request, Kelrit proposes that a $77,000.00 p.a. reduction be made to your total rental figure of $324,132.00p.a." 75 Mr Asquith did not respond to Ms Hawkins counter-offer until 12 January 2000. He rejected the terms proposed; he indicated that he had "two significantly more attractive offers on the table; he proposed a "maximum lease liability" Transform could accept at 50 Clyde Street; and he sought a response before 21 January 2000. 76 Kelrit did not respond to this letter. It sought legal advice in relation to the matter in late January 2000. (p) The letter of demand and Transform's response 77 On 27 June 2000 Kelrit's solicitors wrote a letter of demand to Transform. It referred to Transform's proposal not to renew the lease and went on (in part): "Our client views this intimation by you with great concern. On two occasions, after part of the demised premises were destroyed by fire, Mr Asquith on behalf of your company, represented unequivocally to representatives of our client, that if our client rebuild sheds 13 and 13A to your specifications, you would exercise the option to renew the lease. Acting on the faith of these plain representations, our client built the shed now known as shed 13 to your specifications. It would not have done so had it not believed, as it was entitled to do, that you would exercise the option. It is not to the point that some of the demised premises may now be surplus to your requirements or that you might be able to obtain cheaper accommodation elsewhere." 78 Mr Asquith responded on 30 June 2000, his letter indicating that: "Your statement that we "represented unequivocally" to your client that we would renew the lease and claim that we engaged in "misleading and deceptive conduct" is denied. In fact we rejected the alleged representation when it was made by your client to our directors. Kelrit sought input from our company regarding the reconstruction of Sheds 13 and 13A as approximately two years remained on the existing lease. In our opinion the building that was constructed is simply a modernised version of what was destroyed and is basically a standard industrial factory building." Emphasis added. 79 The original of the 27 June letter of demand is in evidence. It is clear that that letter had hand written notations on which had been rendered quite illegible by erasure. It is equally clear on the evidence that those notations were on the letter at the time it was first inspected by the applicant's solicitor at the premises of the respondents' solicitor. One of those notations contained a circle around the word "two" in the first line of the paragraph quoted above and the word "once" was marked beside it in the margin. 80 The respondents' solicitors later wrote to the applicants' solicitors acknowledging that the notations had been "inadvertently lost" and they indicated that they had been instructed by their clients to agree that the notation referred to above was as I have described it. 81 Interrogatories were later administered. Mr Ness and Mr Asquith were each asked: "Did you make any hand-written notations on the original letter, a copy of which is annexed and marked "D" ("the Document")?" In each case Mr Asquith and Mr Ness answered in precisely the same terms: "I do not recall making any hand-written notations on the original of the Document, a copy of which is annexed to the request for interrogatories and marked with the letter "D". Both were cross-examined at some length on the notations and their authorship. 82 Mr Ness gave evidence that when the original letter of demand was received by Mr Asquith they met to discuss it. He said he saw the original letter at that time and saw it next about a year later at their solicitors' office. He could not recall whether it had the annotations on it on the latter occasion. 83 I note in passing that the applicant submits that Mr Ness is the likely author of the notations. (q) Other matters 84 Mr Ness expressed the view that the rent payable under the 1996 lease (which was about one third more than that payable under Transform's earlier lease) was above market rates. 85 Mr Hawkins accepted in cross-examination that there was a "glut of space" in the rental market by 1998; that the lease with Transform had a floor so that the rentals could not be reduced; and that the 1996 lease was providing above market rentals. 86 Distinctly, Mr Asquith was asked in cross-examination whether Transform ever wanted the new building. His ultimate answer to this was "No, we didn't at any stage need this new building". Mr Clarke gave evidence that that, at a site meeting with (amongst others) Mr Asquith and Mr Ness on 4 September 1998, Mr Asquith said: "… well I've got to get my business going again as soon as possible. We need the new building. We need to be able to carry out our operations." Ms Hawkins similarly gave evidence that at the 7 September 1998 meeting Mr Asquith stated that "we need this building". This was said in the context of his observing that Transform had "plenty of work and … upcoming contracts".

Matters of Credit 87 Unsurprisingly given the conflict of evidence, each side has challenged the credit of the principal witnesses of the other. It is appropriate that I indicate at the outset my own views of the witnesses. 88 Clive Hawkins appears to be a person who is both irascible and blunt. I do not consider, though, that these qualities were of particular significance in his dealings with Mr Asquith and Mr Ness beyond being an occasional irritant. While I consider aspects of his evidence to be unreliable (usually because it was coloured by his own, idiosyncratic view of things), I do not consider him to have been an untruthful witness. 89 Renee Hawkins I accept as a witness who tried conscientiously to give truthful evidence. I consider she was apprehensive about Kelrit's financial circumstances. Her apprehension, I consider, coloured her actions. 90 Mr Asquith I consider to be quite unreliable. He was both obstructive and argumentative in giving evidence. I do not consider his second affidavit to be the genuine product of late recall. Rather, it was calculatingly deceptive. The inconsistencies in his evidence and the general tenor of his evidence left me in no doubt that it would be unsafe to rely upon his evidence in matters of significant dispute unless independently corroborated. 91 I do not regard Mr Ness' evidence as capable of providing independent corroboration of Mr Asquith's. His evidence was unreliable in what I would describe as strategic matters. I consider it probable that both Ness and Asquith have sought to present a common and contrived front in this matter.
Submissions, Findings and Conclusions 92 I do not intend to précis in these reasons the lengthy written submissions put in by the parties that relate to factual matters. I will, though, highlight the following matters and contentions advanced by the respondents which they say tell against any finding that they made the representations and offer alleged. 93 These matters are: (i) there were, at the time of the fire, over 25 months to run before the then lease expired and 22 months before any need to exercise the option arose; (ii) the rental under the lease was at above market rates; it could not be reduced; and there was other space available; (iii) there was not work coming in at the end of 1998, a matter of significance to Transform as a "contract manufacturer"; (iv) it was unlikely that the joint venture and the five axis machine were seen as having such importance as to suggest a need or an intention to relocate; (v) notwithstanding the documentation of the leases the alleged representation/offer was not itself documented; and (vi) Kelrit took no steps for a period of almost six months after Transform's final offer in January 2000 before it raised formally the question of non-exercise of the option. 94 For my own part I am satisfied that the representation and offer alleged were made by Mr Asquith (to the knowledge of Mr Ness) at the 7 September meeting and that later actions of the parties were consistent (a) with Kelrit's reliance on the representation and acceptance of the offer and (b) with Transform's acting in furtherance of the representation/offer by participating in the design of the building to suit its continuing purposes as lessee of the main building. 95 I am not satisfied that such a clear and unequivocal representation or offer was made prior to that date, though I consider what was said by Mr Asquith on 18/19 August was likely to have created an expectation that such a representation/offer could be forthcoming. 96 At the time of the fire, debt reduction was a particular concern of Renee Hawkins. I am satisfied that, whether or not she had an exaggerated view of the company's plight, both she and Clive regarded the prospect of a cash settlement with their insurer after the fire as an available and attractive means of debt retirement. I am equally satisfied that the prospect of their taking a cash settlement was early brought home to Mr Asquith by Mr Hawkins and that this probably occurred on 18 August 1998. I reject Mr Asquith's second affidavit account of when the issue of a cash settlement was raised. 97 I equally reject Mr Asquith's account of there being no mention of the option at the 19 August meeting. There is a body of evidence indicating that in the period immediately following the fire Mr Asquith was making statements to the effect that he had to get the business up and going again as soon as possible and that the new building was needed. I refer, for example, to Mr Clarke's evidence on this matter and also to Clive Hawkins account of the later 7 September meeting. I consider it more probable than not that faced with Clive Hawkins' indication that Kelrit wanted a long term commitment before it would rebuild, Mr Asquith made statements which were designed to assuage Clive Hawkins as to Transform's intentions and that those statements had the general character attributed to them by Clive Hawkins in his evidence of the 19 August meeting. I equally consider it probable that mention was made of relocating the five axis machine for the above purpose of reassurance. 98 However, I am not satisfied that what was said on 19 August was so sufficiently clear and unambiguous as to constitute an offer or representation that if Kelrit rebuilt to Transform's specifications and to accommodate its requirements, Transform would remain in possession for the balance of the term of the lease and would agree to exercise the option. Expectations were being created; prospects and reassurances were being proffered; but definite and unqualified representations and commitments were not being made by Mr Asquith. 99 I do not regard Mr Asquith's 20 August letter as throwing any useful light on the representations made and expectations that might reasonably have been created by the 19 August exchange. I reject his statement that the letter was his "notes" of what had been discussed. It was a practical "way forward" letter building on what had been said. It was consistent with there being no definite offer at that stage to exercise the option. But paragraph 5 of the letter (relating to liaising with Kelrit in relation to building reconstruction) was quite consistent with furthering the expectation of a continuing relationship on the site. 100 I do find that sometime in late August Mr Asquith told Clive Hawkins that he had legal advice to the effect that Kelrit was obliged to put up a new building. Asquith's evidence on what he said and what he knew to be the reality was, to say the least, unconvincing. I do not consider that he believed at any stage that Kelrit was obliged to rebuild. And whatever doubts the Hawkins may have had on the question of their legal obligation to rebuild was, I infer, dispelled at their meeting with their solicitor in late September or early October. 101 I should note in passing, as I have indicated above, that I do not consider Mr Asquith's second affidavit (dealing with his late August conversation with Mr Hawkins) to be the genuine product of late recall. I have disregarded its contents. 102 I accept that the substance of the 7 September meeting was as described by the Hawkins and that, in consequence, both the representation and the offer were made to agree to exercise the option if the building was rebuilt as Transform required. I equally accept the role ascribed by Mr Hawkins to Mr Ness in this meeting relating to the use of the steel frame building; to the relocation of the joint venture; and to the 8 metre height requirement for the building. I reject the contrary evidence of Ness and Asquith. I should add that I find that the relocation of the five axis machine was a matter of significance and preoccupation for Ness and Asquith at this time. Notwithstanding that the joint venture proved in the event to be short lived, it probably explained a deal of the actions of present relevance taken by Transform in August/September 1998. 103 I am satisfied that after their meeting with their solicitor, the Hawkins decided to rebuild and they did so because of the representation and offer made to them concerning the option. It is quite misleading to suggest, as the respondents attempt to, that what the Hawkins did was to rely simply on the advice of their solicitor. The acceptance of that advice was predicated on the making of the representation and offer. 104 I accept Mr Clarke's evidence as to the nature and extent of Mr Asquith's participation in the design of, and in the giving of instructions for, the new building. I equally am satisfied that the steps taken by Mr Asquith and Mr Ness in that regard were in effectuation of what was contemplated by their representation/offer given Kelrit's agreement to rebuild. The building was being designed to meet their requirements and to their specifications. 105 I do not accept Mr Ness' account of his telephone conversation with Clive Hawkins on 26 October 1998 in which reference was allegedly made to the "likelihood of taking up the option". I likewise do not accept the accuracy of what has been proferred as Mr Ness' file note of that conversation. I have already indicated my views on Ness' credit. I accept Mr Hawkins' disavowal of there having been any mention of the option and I agree generally with the applicant's submissions on this matter. 106 It is unnecessary for me to make any finding as to whether or not Mr Ness and Mr Asquith had decided in February 1999 that they had no need for the new building. 107 I accept that at the June 1999 meeting with the Hawkins, Mr Asquith indicated that the joint venture was not going ahead and he raised the question of sub-leasing. I also am satisfied that he reassured the Hawkins as to Transform's own future need for the building. 108 Whether or not Mr Asquith foreshadowed to Ms Hawkins in the telephone conversation of 23 or 24 November that Transform had changed its plans (I consider it likely that he did), it is clear that at the 26 November meeting Mr Ness and Mr Asquith repudiated the commitment and falsified the representation I have found they made on 7 September 1998 and which had been acted upon subsequently both by themselves and by the Hawkins. I am satisfied that at that meeting, while not making direct reference to the option, Ms Hawkins did say words to the effect that "We've built this building for you … You said you were going to stay on here … We're relying on you". 109 The course of the subsequent negotiations and the lack of insistence by the Hawkins that Transform honour its commitment seem, at first blush, somewhat surprising. I am satisfied, though, with Renee Hawkins' explanation that she saw no advantage in attempting to pressure or antagonise Transform as she regarded their tenancy as crucial to Kelrit's financial position. 110 Legal advice was sought in late January 2000. The letter of demand was sent after the time had passed for the exercise of the option. 111 I am reinforced in the view I have taken of the 7 September meeting by the notation that was made and then erased on the letter of demand. It is proper to infer in the circumstances that Mr Ness or Mr Asquith was the author of that notation and that it constitutes a clear admission by Transform that the representation alleged was made. I would have to say that their evidence on this matter was quite unsatisfactory and, in Mr Asquith's case, evasive and obfuscatory. 112 Accordingly I find that the representation propounded by the applicant was made, as was the claimed contractual offer which was accepted on Kelrit's proceeding to construct the building as required. 113 It is unnecessary that I speculate as to why Asquith and Ness acted as they did in late 1998 after the fire. There may well have been rational commercial reasons for not making the commitment to Kelrit that I have found that they did. Nonetheless I am well satisfied that that commitment was made. It clearly was a commitment from which they later wished to resile. A Binding Contract? 114 The contract for which the applicant has contended was an oral one the essential terms of which were that, if Kelrit rebuilt the premises to the specifications and to meet the requirements of Transform, Transform would remain in possession of the premises for the balance of the term of the lease and would exercise the option. The contract so propounded was of that not uncommon variety in which one party's promise contains an express or implied request that the party to whom the promise is addressed do an act or fulfil a condition. The doing of that act or the fulfilling of the condition by the promisee in reliance on the promise will usually constitute consideration for the promise and create a binding contract: see Beaton v McDivitt (1987) 13 NSWLR 162 at 182-183. 115 The facts as I have found them lead inexorably to the conclusion that there was such a contract in this matter. Nonetheless Transform submits that the contract was either invalid or else unenforceable because it did not comply with the writing requirements of either s 23C or s 54A of the Conveyancing Act 1919 (NSW). The terms of these sections are (in part) as follows: "23C Instruments required to be in writing (1) Subject to the provisions of this Act with respect to the creation of interests in land by parol: (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law, … 54A Contracts for sale of land to be in writing (1) No action of proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or not thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged." 116 Transform's submission as I understand it is that, as an option to renew a lease is itself an interest in land, the grant of an option must be in writing as must any variation of the option agreement itself. Reliance was placed upon the observations of Williams J in Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 122-123 to the effect that where a contract is required to be, or to be evidenced, in writing a variation of such a contract is likewise required to be, or to be evidenced, in writing if it is to be effective. It is contended that, as the effect of the oral contract would be to transform an option to renew into an obligation to renew, it operates as an oral - and ineffective - variation of the 1996 lease. 117 The applicant's submissions are first, that the agreement as to the future exercise of the option was an executory one and, as has been held by a majority of the Court of Appeal of New South Wales in Baloglow v Konstanidis [2001] NSWCA 451 at [159] - [192], s 23C does not apply to such a contract; secondly, accepting that the grant of an option created an equitable interest "measured by what a court of equity would decree in an action for specific performance": Commissioner of Taxes (Queensland) v Camphin (1937) 57 CLR 127 at 134; that grant was evidenced in writing in the 1996 lease and the oral contract did not in any way vary that interest or create any new interest; thirdly, the oral contract involved no contract for the sale or other disposition of any interest in land as Kelrit was already obliged to grant a renewal if properly requested by Transform so to do, and what Transform was now agreeing to was to exercise the right it had as and when the time for its exercise fell due under the lease; fourthly, and in any event, in light (a) of Transform's representations as to what it would do if Kelrit rebuilt, and (b) of Kelrit's actions in reliance thereon, it would be unconscionable to permit Transform now to depart from the promises it made and to raise the unenforceability of that promise: Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 610. 118 For my own part I consider that, as this matter is being determined in New South Wales, I ought accept the approach taken in Baloglow's case to s 23C and s 54A of the Conveyancing Act. As the oral agreement is executory in character, s 23C can have no application to the matter. Insofar as concerns s 54A, I am not satisfied that the oral contract operated as a variation of the original option agreement. That agreement gave to Transform a right to choose whether or not to take a renewal. Under the oral contract Transform committed itself as to the choice it would make. The option itself was not thereby varied. Rather the oral contract "fettered" permissibly the choice Transform would otherwise have enjoyed. Importantly, the contract was not for the disposition of any interest in land. Kelrit's obligation to Transform remained unchanged to grant a renewal when requested so to do under the lease. Transform's interest in consequence of the option likewise remained unchanged: it remained "measured by what a court of equity would decree". 119 It is unnecessary that I go on to consider whether, distinctly, Transform would in any event be estopped (a) from relying upon the Conveyancing Act, or, (b) from resiling from the promise upon which it induced Kelrit to rely. However I would make the observation that the case, on my findings, would seem to be a quintessential one of equitable estoppel: cf Robertson, "The Statute of Frauds, Equitable Estoppel and the Need for 'Something More'" (2003) 19 Jo Contract L 173. The TP Act Claim 120 In light of the representation I have found to have been made by Transform on 7 September 1998, it is accepted by the respondents that I must find that Transform's conduct was then misleading or deceptive as their evidence was that at that time they had no intention of exercising the option. I have already found that the Hawkins, hence Kelrit, relied on the representation. DAMAGES Introduction 121 Kelrit seeks in the alternative damages for breach of the oral contract and damages under s 82 of the TP Act. It acknowledges that these are inconsistent remedies and that it will in this case have to elect between them "before judgment": Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35 at 37; Tang Man Sit v Capacious Investments Ltd [1996] AC 514; and see generally Mason and Carter, Restitution Law in Australia (1995), [2304]ff; Goff and Jones, The Law of Restitution (6th ed, 2002). I have, in consequence, been asked to assess damages on both basis but not to make orders against the respondents until an election has been made.

Kelrit Investments Pty Limited v Transform Composites Holdings

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