Kent v Hogarth [1995] QCA 472

Court of Appeal (Qld)|1995-10-24|Before: Before Fitzgerald P, Pincus J, Shepherdson J, Fitzgerald P

The circumstances giving rise to this appeal are set out in the judgment of Shepherdson J. I will refer to only those matters which are essential to my conclusion.

I agree with Shepherdson J. that it was open to the trial judge to reject the female appellant's evidence that she posted a written response to the letter which the respondents wrote to the appellant in April 1994. The argument to the contrary was technical in the extreme, and, in part at least, susceptible of more trenchant criticism. The trial was patently conducted on the footing that the alleged response was never received, and there can have been no doubt but that the respondents sought to have the trial judge infer that it was not posted, despite the female appellant's testimony that she did so. To describe her evidence as "unchallenged" and thus evidence which the trial judge was obliged to accept is without substance in the circumstances, as is the submission that it was essential that she be given the opportunity of denying a suggestion that she had never posted the response; such a denial would add nothing whatever to the evidence that she had already given that she had posted the response, and could not have led to elaboration, explanation, or any other matter which would have supported her story. The rules to which the appellant's argument made reference are concerned with fairness in the trial process; their purpose is not to produce injustice by imposing artificial constraints upon findings which are obviously open as a matter of common sense. The respondents had no specific basis upon which to allege fabrication or mistake by the female appellant, and could not properly cross-examine her on the footing that they did; they were, however, entitled to ask the trial judge, who observed her and listened to her evidence, not to accept what she said on the matter having regard to any criticisms which could be made of the credibility and reliability of her evidence.

If the appellants had exercised their option to renew the lease, the parties could have agreed the rent for the entire term, and might have needed to do so for the first year if there was to be a concluded bargain. However, the respondents were entitled to leave the rent for at least the second and third years of the extended term to be "reappraised".

The appellants failed to exercise their option, but the respondents remained willing to have them extend their lease at a rental, for the first year, nominated by the respondents; namely, $8,400 per year payable by equal monthly payments of $700 each. That was consistent with the tenor of the option, and the respondents' right to have the rental in the later years "reappraised". Commencing by a letter on 22 February 1994, the respondents made their position clear on a number of occasions, while pointing out that the lease then current expired on 31 July that year. In March 1994, the appellants indicated to the respondents' solicitor a desire to negotiate with the respondents with respect to the rent which had been specified, but they still had not done so by 16 June when they were given an ultimatum; "... accept a renewal of your lease on the terms set out in [the respondents' solicitors'] letter of 22nd of February ..." or "... vacate the premises on the 31st of July next."

It was only then that the appellants took any step towards committing themselves. The trial judge found that, in a telephone conversation in mid-June 1994, the female appellant told the respondents' solicitor that the appellants wished to renew the lease and were prepared to pay the rental of which they had earlier been informed; the respondents' solicitor responded by saying that he would prepare the documents for signature.

The first question is whether the respondents thereupon became contractually bound to lease the premises to the appellants for the extended term at a rental for the first year of $700.00 per month. I do not perceive any general objection to an offer which is communicated by a letter from an offeror's solicitor being accepted by a communication to the offeror's solicitor; whether such a communication will be effective as an acceptance of the offer, and whether a written acceptance is required or an oral acceptance will suffice, will generally depend on what the offeror intended. Likewise, intention will be determinative of whether formal documentation is necessary before a binding contract is made.

In my opinion, the trial judge was correct in his decision that a binding contract was not concluded in the female appellant's telephone call to the respondents' solicitor in mid-June 1994. Execution of a formal extension of the lease was contemplated, and the parties had not legally committed themselves to the preparation and execution of such a document by the communications between the appellants and the respondents' solicitor: Masters v. Cameron [1954] HCA 72; (1954) 91 C.L.R. 353.

It is unnecessary to decide what the legal position would be if the document collected by the male respondent from their solicitor and delivered to the appellants had corresponded with the respondents' earlier communications; whether considered as a ratification of their solicitor's conversation with the female appellant in mid-June or on some other footing, there could thereafter be no escape by the respondents on the basis of some limitation upon their solicitor's authority. The appellants might have been in a stronger position to argue that the respondents were contractually bound to execute the document which their solicitor had prepared if it had given effect to the attitude which had earlier been communicated.

However, the solicitor's document was significantly different and, at best for the appellants, constituted a fresh offer; whereas earlier communications had been concerned with the rent for only the first year of the extension, leaving the respondents' right to have it "reappraised" to operate in the second and third years, the formal document included the same rental for each of the three years. The respondents were entitled to, and did, withdraw that "offer" before it was accepted by the appellants.

Accordingly, I agree with the judgment below that there was no binding contract. The appeal should be dismissed with costs to be taxed.

The facts of the case are set out in detail in the reasons of Shepherdson J. The main point is whether what passed orally between the appellant Mrs Kent and Mr Towers of the respondents' solicitors on 17 June 1994 brought about a binding agreement for extension of the lease. The primary judge held that it did not, on the bases that the solicitor did not have authority to make the agreement set up by the appellants and also that the parties' intention was not to make a concluded bargain unless and until they executed a formal contract: Masters v. Cameron [1954] HCA 72; (1954) 91 C.L.R. 353 at 360.

As Shepherdson J explains, a deed of extension was prepared by the respondents' solicitors for signature by the parties, but before that was executed the respondents' solicitors, by letter of 11 July 1994, wrote to say that the appellants must vacate the premises; so this branch of the appellants' case stands or falls on the proposition that there was an oral agreement on 17 June 1994 to which the solicitors bound the respondents. According to Mrs Kent, in the conversation with Mr Towers he said "Well, you want the lease, you want the rent increase, you accept it?", and she said yes. Her evidence continued:

"He said, `Good, fine', words to that effect, and I asked him if he wanted it confirmed in writing, and he said no, that was fine as it was".

In cross-examination Mrs Kent conceded that "possibly" Mr Towers said he would prepare documents and send them out to her. Mr Towers said in his evidence that Mrs Kent -

" . . . said that she and her husband wished to renew the lease and that they would pay the proposed increased rental ".

" I can't recall exactly what I said but I would have said, 'Well, I will prepare the documents for signature', something of that nature ".

On the basis of that evidence the judge has found that Mr Towers "responded by saying to Mrs Kent words to the effect that he would prepare the documents for signature", although Mr Towers did not say he had a specific recollection of having done so.

The respondents did not plead that, if there was an oral agreement on 17 June made between Mrs Kent, on behalf of the appellants, and the solicitor, on behalf of the respondents, that was done without the respondents' authority; but they did plead, in para. 7 of their defence, that it was the parties' intention not to make a concluded agreement to renew the lease until each executed a deed of extension. Whether because that plea was thought necessarily to involve that the solicitor did not have, and was not thought to have, authority to make an oral agreement for extension, or for some other reason, the judge decided the matter on the basis that the extent of the solicitor's authority was in issue; the submissions made in the parties' outlines seemed to accept that his Honour was correct in approaching the matter in that way.

On this branch of the case, it does not appear to me that anything turns on demeanour or that in any respect the primary judge had an advantage denied to this Court; the question is simply whether his Honour's conclusion was right. As Shepherdson J explains, the respondents' solicitors had written on 22 February offering, in effect, renewal as if under the lease, on the basis that the rental for the first year of the renewal period would be $8,400. That was followed by further correspondence in April, and the letter of 16 June, which led to the conversation on 17 June between Mr Towers and Mrs Kent, referred to renewal on the terms set out in the letter of 22 February. The offer was, therefore, to allow the lease to be renewed as if under the option in the lease, which contemplated (cl. 7.1) a renewal for 3 years.

If there was an oral agreement on 17 June, it left room for argument as to what the rent would be in the second and third years of the period of renewal. The deed which Mr Towers later prepared provided for a rental of $700 per calendar month, that is $8,400 per year, for the whole three years, not just for the first year. Clause 3.17.4 of the lease provided in effect that during any renewal the lessor might "require that the annual rental payable in the second yearly period be reviewed and determined" on a certain basis. Clause 7.3 contained another provision relating to the fixation of the rent during any extended term of the lease.

Mr Towers' evidence, quoted by Shepherdson J, was to the effect that after the conversation of 17 June all that had to be done was to prepare a "formal document" and that the "matter was simple". Assuming that Mr Towers' opinion on that subject was admissible, it was in my view incorrect; the parties had not on 17 June agreed on the rental for the second and third years of the renewed term. If they did not later agree on that, presumably procedures set out in the clauses in the lease to which I have referred would have had to be followed, to fix the rentals for the second and third years. This circumstance makes it more difficult for the appellants to support the view that the matter was so uncomplicated that they might reasonably have assumed that an extension might effectively be agreed on by a mere oral acceptance of what was proposed on 22 February.

A solicitor authorised to negotiate and agree the terms of a contract does not for that reason ordinarily have authority to enter into a contract: Pianta v. National Finance & Trustees Ltd [1964] HCA 61; (1964) 180 C.L.R. 146 at 152; see also Rymark Australia Development Consultants Pty Ltd v. Draper [1977] Qd.R. 336 at 344 and Nowrani Pty Ltd v. Brown [1989] 2 Qd.R. 582 at 586. In Australia, at least, the tendency is not to treat a solicitor as having ostensible authority to contract, still less to alter a contract: CTM Nominees Pty Ltd v. Galba Pty Ltd (1982) 2 B.P.R. 9588, Longpocket Investments Pty Ltd v. Hoadley (1985) 3 B.P.R. 9606.

The letters written by the solicitors to the appellants offering a renewal of the lease (starting with that of 22 February) were written with the clients' authority and at least held the solicitors out as the "medium of communication": Magripilis v. Baird (1926) Q.S.R. 89 at 91. But what the appellants have to show, in order to succeed on this branch of the case, is more than that the solicitors had authority to receive from the appellants an acceptance of the offer to renew; they have to show that the authority extended so far as to make, by having such a conversation as in fact occurred, an oral agreement for renewal.

A reason why people use solicitors in business transactions is to ensure that their dealings will be properly documented; one would not usually expect a solicitor, engaged in relation to a prospective contract, to have authority to contract orally, creating a situation fraught with the risk of dispute about the content and indeed existence of the contract, a risk the avoidance of which is one of the purposes of engaging a solicitor. It is my opinion that the solicitor Mr Towers had neither actual nor ostensible authority to make an oral agreement to extend the lease and that therefore the conversation of 17 June did not bring such an agreement into existence.

In this case, there is no need to decide whether, if the appellants had on 17 June accepted in writing instead of doing so orally, that would have been enough to make a contract, without the signature of a formal deed of extension such as Mr Towers prepared; for it is common ground that there was no written communication on 17 June.

It was also put by counsel for the appellants, in his helpful argument, that the judge should have found that the appellants accepted the offer of an extension in writing, by a letter they claim to have written to the solicitors in April. I am of opinion, agreeing with the President and Shepherdson J on that aspect, that the primary judge's conclusion, that he could not be satisfied that such a letter was sent, should not be disturbed.

In the result, I agree with the order proposed by the President.

The abovenamed defendants ("the respondents") are the registered owners of certain freehold land in the parish of Woorim on Bribie Island. On or about 9 August 1991, the respondents granted to Greg Bentick and Val Bentick a lease of part of the ground floor of the building erected on that land, as delineated in red on a sketch plan attached to the written instrument of lease for a period of three years commencing on 1 August 1991 and terminating on 31 July 1994.

On or about 20 December 1991, the Benticks assigned to the appellants their interest in the lease and the respondents duly consented to that assignment.

The lease contained a clause (7.1) giving the lessees thereunder an option of renewing the lease for a further period of three years from the expiration of the three year term terminating on 31 July 1994. The lease expressly provided in cl.7.1 thereof:-

"This option for renewal shall be exercisable only by notice in writing delivered by the lessees to the lessor not less than six (6) calendar months prior to the expiration of the term hereby granted."

The appellants did not give notice in writing within the six calendar months prior to the termination of the lease.

The appellants sued the defendants in the District Court held at Brisbane seeking primarily specific performance of an alleged agreement made with the respondents for the respondents to give them a lease of the premises for three years from 1 August 1994. The appellants also sought an injunction restraining the respondents from interfering with the appellants' quiet possession of the premises allegedly agreed to be leased.

The learned Judge of District Courts who tried the action gave judgment for the respondents against the appellants after finding that the appellants' action had failed. From that decision this appeal is brought.

The appellants have argued their case on two bases. The first concerns a finding by the learned trial Judge that no letter of acceptance of an offer was posted to the respondents' solicitors on or about 14 April 1994. The second basis concerned the authority of the respondents' solicitors to enter into a binding agreement for lease on behalf of the respondents.

Before considering each of these bases it should be said that the evidence led before the learned trial Judge did not accord entirely with the matters pleaded. However, the parties did not dispute that this appeal should be dealt with on the basis of the evidence before His Honour.

As already stated the appellants did not, within the time stipulated in the lease, exercise the option for the three year extension of the lease.

On 22 February 1994, Towers & Co solicitors of Bribie Island wrote to the appellants a letter which (omitting formal parts) read:-

We act for LC DC AJ and MF Hogarth the lessors of the shop premises occupied by you.

Our clients instruct us that the current lease expires on 31st of July 1994. The lease contains an option for renewal.

If you wish to exercise the option the rental for the first year of the renewal period will be $8,400 per year payable by equal monthly payments of $700 each.

As the learned trial Judge found, the appellants did not respond to that letter.

On 11 March 1994, Towers & Co wrote again to the appellants. That letter, (omitting formal parts) read:-

We refer to the above matter and to our letter of the 22nd February 1994.

We remind you that your lease contains an option for renewal as of the 31st July 1994. Could you please contact our office as regards the exercise of this option."

The learned trial Judge found that on 23 March 1994, Mr Towers Jnr rang the male appellant and asked him whether the appellants wished to extend their lease. He found that the male appellant answered to the effect that he wanted to speak to Mr Hogarth about the rent and Mr Towers responded by enquiring as to whether he could help the male appellant. As His Honour said:-

"Mr Kent replied, `No. I'll speak to Mr Hogarth and I'll write a letter.' No discussion was ever had by Mr Kent with any of the defendants. No letter was ever written."

On 8 April 1994, Towers & Co wrote again to the appellants. That letter (omitting formal parts) read:-

We refer to the above matter and to the telephone conversation between Mr Kent and Mr John Towers of this office on the 23rd March 1994.

We again ask that you contact our office with a view to discussing the option for extension of your current lease."

At the trial the appellants gave evidence to the effect that after having received this letter of 14 April 1994 the male appellant wrote a short letter on a small piece of paper. He said he had addressed it to the respondents' solicitors and had written words "I wish to exercise the option to take up the renewal of the lease" and further wrote that he was prepared to pay the new rental of $700 per month.

"Mr Kent told me he gave that letter to Mrs Kent. Mrs Kent said she posted it to the defendants' solicitors. That letter was said to have been posted at the Woorim Post Office. The effect of Mrs Kent's evidence was that she posted it to the defendants' solicitor at their correct post office box which was number 61 Bribie Island. The plaintiff (sic) kept no copy of that letter which, according to their evidence remained in manuscript.

Immediately she received the letter dated 16th June from the defendants' solicitors [this was a letter to which I shall later refer] Mrs Kent rang the solicitors' office and left a message for Mr Towers Snr. During a conversation with the receptionist she, in her words:-

Later that day, Mr Towers Snr rang back. Mrs Kent told me that when she first spoke to Mr Towers Snr she had drawn his attention to the fact that her husband had written a handwritten acceptance. Mr Towers Snr had no recollection of such a mention and made no note of it. I am not satisfied the matter was discussed during that phone call. The possibility of a letter going astray on Bribie Island must be even more remote than it is elsewhere. Besides I was not impressed with the demeanour of either Mr or Mrs Kent when they gave their evidence about the alleged preparation and posting of that letter. On the whole of the evidence the plaintiffs have failed to satisfy me that the said letter in manuscript was ever posted to the defendants' solicitors as Mrs Kent claimed."

It is clear from the above extract from His Honour's judgment that his finding concerning the alleged posting of the letter was based on the credibility of the female appellant and that to a substantial degree. As was recently said by the majority of the High Court in Devries v Australian National Railways Commission (1993) 177 CLR 472 at p.479:-

"If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge `has failed to use or has palpably misused his advantage' or has acted on evidence which was `inconsistent with facts incontrovertibly established by the evidence' or which was `glaringly improbable'."

The appellants' counsel Mr Thompson seeks to avoid the problem which confronts him in Devries by submitting that the evidence of the female appellant as to the posting of the letter is unchallenged and therefore the learned trial Judge should have accepted and acted on her evidence.

His argument that this evidence is unchallenged is based on certain evidence given by Mr Towers Snr who was then the proprietor of Towers & Co. He became a consultant after 30 June 1994. In evidence Mr Towers Snr swore that he had never received any written communication from the appellants at all and that he had a system in his office by which inward and outward mail was recorded. A book was produced but did not assist in showing receipt of the letter. In cross-examination (p.52) Mr Thompson suggested to him that in a conversation with Mr Towers, the female appellant did suggest that she had posted a letter written by her husband to his firm and he answered "I have no recollection of that at all and I doubt very much that it was said otherwise I believe I would have noted it". He was here referring to a telephone conversation between the female appellant and Mr Towers Snr which His Honour found was on 16 June 1994 and to which I shall later refer.

Mr Thompson's point is a narrow one; it is that Mr Towers Snr at no stage swore that his firm had never received the letter only that he had never received any such letter. It is patently clear from the learned trial Judge's findings that he disbelieved the female plaintiff as to the posting of the letter in manuscript. It is trite to say that posting must occur before receipt. If the former did not occur the latter cannot have occurred.

In my view the argument based on there being no evidence that the office of Towers & Co did not receive the letter has no substance.

Mr Thompson's further argument is that before the adverse finding against the female appellant as to the posting of the letter was made, she should have been given the opportunity of denying a suggestion that she had never posted the letter. To support his submission, Mr Thompson relies on the following dictum of Gibbs J. (as he then was) in Precision Plastics Pty Ltd v. Demir [1975] HCA 27; (1975) 132 CLR 362 at p.370:-

"If it had been intended to suggest that she was not speaking the truth she should have been cross-examined on this matter so that she might have had an opportunity of explanation (cf. Browne v. Dunn (1893) 6 R 67 at pp.76-77), but she was not in fact cross-examined on her answer."

In my respectful view the above dictum does not help the appellants in the present case. From the respondents' point of view, their solicitor's knowledge, as evinced by the evidence of Mr Towers Snr, was that Mr Towers Snr had not received such letter. Although the inwards and outwards mail book was tendered for identification only, and that by counsel for the respondents, the irresistible inference to be drawn from the evidence is that there was no record in such book of receipt of the letter.

In these circumstances, it was not open to the respondents' counsel to suggest to the female appellant that she was not speaking the truth when she said she had posted the letter. His instructions went only so far as non receipt of any such letter.

The learned trial Judge, as judge of the facts, did reject the female appellant as a witness of truth in regard to the posting of the letter, but this rejection had nothing to do with any alleged failure by the respondents' counsel to suggest that she was not speaking the truth when she swore that she had posted the letter.

The finding as to non posting of the letter did not of itself mean that the appellants' claim was doomed.

On 16 June 1994, Towers & Co again wrote to the appellants and that letter (omitting formal parts) read:-

We refer to previous correspondence and note that we have not received your response to our letters of the 8th of April and the 14th of April.

Our client instructs us that if you are not prepared to accept a renewal of your lease on the terms set out in our letter of 22nd of February, you will be expected to vacate the premises on the 31st July next."

The learned trial Judge found that by 16 June 1994 nothing further had been heard by the respondents' solicitors and that on that date their solicitors again wrote to the appellants in the above terms.

His Honour also found that on 16 June 1994 the female appellant told Mr Towers Snr [in a telephone conversation] that she and her husband wished to renew the lease, that she said they were prepared to pay the proposed $700 per month rent and that Mr Towers Snr responded by saying to the female appellant words to the effect that he would prepare the documents for signature.

"Mr Towers Snr then prepared a deed of extension of lease which he had his secretary engross. On 24th June 1994, Mr Hogarth Snr called at his solicitors' office and Mr Towers Snr's secretary handed the engrossed deed of extension plus two copies and he left the office. Mr Hogarth Snr delivered the original and two copies of the deed of extension to the plaintiffs on the same day. It is clear from the evidence that the plaintiffs were expecting to receive the deed of extension and saw it as significant. Nevertheless, they did not sign the deed of extension until 14th July 1994."

His Honour also found that before 14 July 1994 the appellants had already received a letter from the respondents' solicitors dated 11 July 1994 in the following terms:-

"Your current lease of the premises expires on 31st July next. As you have failed to exercise your option to renew as required by clause 7.1 of the lease you are required to vacate the premises by the 1st August next. Our clients have instructed us that they are not prepared to waive your failure to notify them of your intention to renew the lease for a further term. Stamped original lease is enclosed herewith together with copy assignment of lease."

It appears that His Honour erred in finding that on 24 June 1994 Mr Hogarth Snr had given the deed of extension to the appellants. Such a finding was not supported by the evidence of Mr Hogarth Snr nor by the evidence of Ms Donaldson who on 24 June 1994 was the secretary of Mr Towers Snr. Mr Hogarth in his evidence gave no date of delivery to the appellants. He could not remember the date; he spoke of having collected the documents from Towers' office and on the same day having driven from Towers' office a distance of some 3 miles across Bribie Island to the appellants' fish shop where he said he gave the documents to the appellants. (T.p.37/47). Ms Donaldson was unable to recall whether or not she gave the documents to Mr Hogarth on 24 June.

The evidence of the male appellant was that the deed of extension was delivered to him on Friday 1 July 1994; (see T p.14/2), this was one week after the date found by the learned trial Judge. It is open to this court to conclude on the evidence that on 1 July 1994, the deed of extension was delivered by Mr Hogarth Snr to the appellants.

The learned trial Judge having made the above findings as to the conversation between the female appellant and Mr Towers Snr on 16 June 1994 later on said this:-

"Having rejected the notion that Mr and Mrs Kent posted a manuscript acceptance of an `offer' from the defendants at some time earlier than 16th June 1994, the focus must be on the conversation between Mr Towers Snr and Mrs Kent on that date."

"It was clearly the solicitors who had been left by the defendants to make approaches to Mr and Mrs Kent but it is quite another step to accept the notion that the solicitors as a matter of course should be taken as having received and exercised authority to enter into a binding lease agreement without that agreement being reduced to writing in the usual form and signed by both parties."

His Honour then referred to certain evidence given by Mr Towers Snr in cross-examination in part of which the following appeared:-

"Question: In any event you didn't see any further correspondence being necessary about the matter?

Answer: No I understood Mrs Kent to say that they wish to renew the lease they were prepared to pay an increased rental and I believe that my function then was imply to prepare documents.

Question: Because of what you heard from Mrs Kent it wasn't necessary for you to put a covering letter on it or communicate further ... ?

Answer: I didn't feel it was necessary for me to write back and say `we confirm your advices that you desire to renew the lease at a rental of X dollars per month.'

Answer: I thought the matter was simple and it would be finalised."

In my respectful view the basic premise of the above finding namely that the solicitors had been left to make approaches to the appellants misconstrues the evidence and fails to take account of admissions made in the Entry of Appearance and Defence.

In their plaint the plaintiffs had alleged in respect of each of the letters dated 22nd February 1994, 11 March 1994, 8 April 1994 and 14 April 1994 that the respondents "by their solicitors wrote to the [appellants] inviting [the appellants]" to take up or exercise the option for renewal.

In their Appearance and Defence the respondents admitted each of these allegations. The letters variously asked the appellants to advise the solicitors if they wish to exercise the option for renewal (letter 22.2.94), to contract the solicitors as regards the exercise of the option (letter 11.3.94), to contact the solicitors with a view to discussing the option for extension of their current lease (letter 8.4.94) and to advise the solicitors of their intentions (letter 14.4.94).

In my respectful view these admissions in the Entry of Appearance and Defence are capable of being construed as the respondents admitting having clothed the solicitors with authority on behalf of the respondents to make at least an oral agreement with the appellants for an extension of the lease for three years at a rental of $700 per month for the first year. The rent for the first year had been stipulated in the letter 22 February 1994 and in the letter of 14 April 1994, the solicitors had written:-

"We are instructed to advise that should you not be prepared to pay the rental increase referred to in our letter of the 22nd February the lessors require that you vacate the premises on the expiration of the lease on 31st July next."

The letter of 16 June 1994 referred to "a renewal of your lease on the terms set out in our letter of 22nd February" and these terms included the rental for the first year.

On 16 June 1994, the female had, as His Honour found, told Mr Towers Snr the appellants were prepared to pay the proposed $700 per month rent. This statement by the female appellant is uncertain in that it may be interpreted as the appellants being willing to pay $700 per month for the first year or for the 3 years. In his letter of 22 February Mr Towers Snr had said "the rental for the first year of the renewal period will be $8,400 per year payable by equal monthly payments of $700 each." The introduction of "per year" created some ambiguity but I interpret the letter as indicating the rent for the first year only.

The document prepared by Mr Towers as a result of that conversation reinforces this uncertainty. That document recited the two options each to extend the term of the lease for a further period of three years pursuant to clauses 7.1 and 7.2 thereof and the fact that "the lessee has requested the exercise of the aforesaid extension and is entitled to a further lease of the leased premises for a term of three years from the 1st August 1994 and the lessor has consented to the same." The deed of extension further provided that the rent for the whole of the three years was "a calendar monthly rental of $700". This latter provision did not accord with the letter of 22 February 1994 and I shall later discuss this aspect. In short, the condition precedent in the lease as to the option being exercised at least six months before 31 July 1994 was ignored and the deed of extension was drawn on the basis that the option was exercised. This accords with the texts of the letters from Towers & Co to the appellants continually referring to the exercise of the option for renewal. However, despite the form of the document, I prefer to construe it as an agreement to give and take a fresh lease of 3 years from 1 August 1994 in the same terms as if the option had been effectively exercised (cf. Duncan Properties Pty Ltd v Hunter (1991) 1 Qd.R 101).

I point out at this stage that cl.7.1 of the original lease which contains the option for the first three years extension, when combined with cl.7.3 showed that it was open to the parties to agree the rent for such extended term. This agreement did not eventuate despite the above evidence from Mr Towers Snr referred to by the learned trial Judge in his reasons and in which Mr Towers Snr described the matter as simple. I do not overlook the provisions of cl.3.17 of the original lease in terms of which the respondents had the sole right to have the rent during any extension period reappraised such reappraisal to take effect from the commencement of the second and subsequent years of the lease. Whether cl.3.17 marries with cl.7.3 is a matter on which I express no view but I shortly mention it again.

The correspondence from the solicitors up to and including 16 June shows that there were only two matters between the appellants and the respondents on which the respondents were seeking the appellants' agreement. The first was whether or not the appellants wanted the further term of three years from 1 August 1994 and the second was whether they were agreeable to pay rental of $8,400 during the first year of that 3 year period.

The deed of extension prepared by Mr Towers Snr provided for the term of 3 years from 1 August 1994, and instead of stipulating the rent for the first of those 3 years said (in cl.1):-

" ... and subject to the payment on the same days and in a like manner as is provided in the said lease at a calender (sic) monthly rental of seven hundred dollars ($700.00) the first of such calender (sic) monthly payments to be payable on the 1st day of August 1994".

I interpret cl.1 as meaning that the rental was to be $700 per month during the whole 2 years.

"The parties hereto acknowledge and agree that they are bound by all other terms and conditions of the said Lease dated the 9th day of August, 1991 mutatis mutandis as if the same were set out in full herein."

The effect of cl.2 was to incorporate from the 1991 lease the provisions therein appearing giving the lessor the right to reappraise rental at the end of every year of the 1991 lease "including any extended term of renewal" of the 1991 lease. (see cl.3.17.1)

The rent provisions in cl.1 of the deed of extension, applying as they do to the whole of the 3 year period are in marked contrast to the rental provisions in the 1991 lease.

The provisions there were for a stipulated annual rent payable monthly "for the first year of the lease and thereafter a (sic) provided in the Schedule to the Lease". Clause 3.17 appears in the Schedule.

In my view the deed of extension prepared by Mr Towers Snr and sent to the appellants went beyond and did not reflect what were his instructions as to rent as appearing in the letter of 22 February. The evidence is silent as to whether or not the appellants believed they were to pay $700 per month for the first year only or $700 per month for the whole 3 years.

The evidence really does not disclose whether or not the female appellant counter offered $700 per month for the 3 year term. I will assume she did not. The fact that Mr Towers accepted what was told him by the female appellant on 16 June and did not then refer the matter to the respondents but went ahead and prepared the deed shows Mr Towers probably believed "they wish to renew the lease, they were prepared to pay an increased rental", that his function then was just simply to prepare documents and to have them executed by the parties. He said that the contents of the document had to reflect accurately what the parties were agreeing to and that he would like to think that his deed did that.

The evidence of Mr L.C. Hogarth (T.p.37/8) shows that he gave Mr Towers, in layman's language, instructions to write to the appellants to find out what they were going to do and that from time to time checked to see what was happening.

If I assume that the female appellant counter offered $700 per month for the whole of the 3 year term there is no evidence to suggest that Mr Towers Snr referred that counter offer to the respondents before preparing the deed of extension.

On any view of the conversation of 16 June between Mr Towers Snr and the female appellant there can be no basis for believing that an oral agreement between the parties then came into being. The contents of the deed of extension to which I have already referred and more particularly the stipulated rent for 3 years clearly show that result. There was no evidence to justify a finding of authority whether ostensible or actual in the Mr Towers Snr to enter into or conclude any such agreement on behalf of the respondent (see Rymark Australian Development v. Draper (1977) Qd.R. 336 at 334; Pianta v. National Finance & Trustees Ltd [1964] HCA 61; (1964) 38 ALJR 232 at 233-4. The evidence showed that no concluded contract was entered into between the parties on 16 June 1994.

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Judgment (107 paragraphs)

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