Kokos International Pty Ltd v Libra Motors Pty Ltd & Anor [2005] WASC 209

Kokos International Pty Ltd v Libra Motors Pty Ltd & Anor [2005] WASC 209 - WASC 2005 case summary — Zoe

[145]

98 Mr Baruffi gave evidence that he did indeed instruct Ms Baruffi to advise Ms Derksen that, in order for the plaintiff to obtain an option for a further term, a new lease would have to be entered into. On his evidence, Ms Baruffi told him that the option had been omitted from the assignment document and he said to her that there was no option to be put in the assignment documents. However, if the tenants wanted options there would have to be a new lease and the defendants were prepared to give them "a 5 plus 5 plus 5". According to Mr Baruffi, he relied on his earlier conversation with Mr Lukman as authorisation for that offer. At a later point in his evidence he said that he could not remember whether he went back to Mr Lukman to discuss the matter but had no recollection of any further conversations with Mr Lukman after the initial one. One of the many difficulties with Mr Baruffi's evidence is that, knowing that a five-year extension had been requested and approved, he rejected the five-year option out of hand without making any enquiries of Mr Young as to whether it was indeed an option that he wanted, and without going back to Mr Lukman to find out his attitude to a five-year option. Mr Baruffi asserted that his discussion with Mr Lukman on 17 June 1999 included instructions to recover all outgoings if the plaintiff opted for further options to be included in a new lease. This point had not previously been raised by Mr Baruffi when recounting the conversation with Mr Lukman. I did not find Mr Baruffi's evidence on this point particularly convincing. His failure to mention this aspect of the conversation with Mr Lukman leads me to conclude that this aspect of the conversation did not occur at that time, as later alleged In my view, it is highly unlikely that the discussion at that early point in time would have descended to the level of detail contained in Mr Baruffi's instructions to the solicitor and in his letters to Mr Young. Accordingly, in my view, the changes requested by Mr Baruffi are more likely to be the result of a discussion with Mr Lukman.

[196]

135 However, in accordance with the 18 June facsimile, if Mr Young simply requested a five-year extension rather than a five-year option, there was no reason why there could not be an assignment of lease with an extension of lease for five years. Mr Young was never given that opportunity. Mr Baruffi was asked in cross-examination why he didn't tell Mr Young that he had a choice between taking an extension of five years and a new lease with a five-year term and two five-year options. He stated that he may or may not have told Mr Young as he couldn't remember the details of any discussions. Another explanation was that he understood that Mr Young's desire was to have the lease with a series of options in it. This is in direct conflict with the evidence of Ms Derksen and Ms Baruffi that their discussion related only to the absence of one option. In my view, these explanations are not only contradictory, they are also improbable. Another explanation was that the issue of the extension of the lease died when Baruffi & Associates received the note from the settlement agent that Mr Young wanted an option in the lease. After that, the only discussion was about a new lease. Mr Baruffi disputed the proposition that, if the parties were unable to reach an agreement on the terms of the new lease, the plaintiff would obviously want to rely on the approval granted to them in writing on 18 June 1999. He explained that 17 June meeting was simply a request for information which was subsequently provided. There was no proposal to assign the lease at that time. According to Mr Baruffi, the proposal contained an option and from then on the parties were not discussion extensions to the lease. On Mr Baruffi's evidence, it never occurred to him that, if they if they failed to agree terms the plaintiff might want to go back to the extension of the existing lease. This was because Mr Young had agreed to the terms of the new lease. When asked when he had done that Mr Baruffi replied: "In his letter - in our conversation we had on 15 September." That statement was clearly inaccurate and, not surprisingly, Mr Baruffi backtracked by saying that there had been agreement to the terms they had been discussing which Mr Baruffi considered were core terms of the lease. It is clear on the evidence that no agreement was ever reached on the terms of a new lease. If the scenario which Mr Baruffi presents constitutes an agreement on a new lease then, on the same analysis, there existed an agreement to extend the lease for a period of five years. In my view, this is an example of a manipulation of the facts to support Mr Baruffi's own version of events.

[202]

140 Mr Young accepted that it had never been represented to him by Mr Baruffi or anyone else that the defendants had agreed to grant an additional five-year option over and above the five-year extension. However, Mr Young denied that this letter was a belated attempt to negotiate a new lease with an option for a further five years. Mr Young was asked to identify where in the document he exercised the option which he maintained had been agreed. He referred to the phrase "We would be looking forward to another five years." On behalf of the defendants, it was submitted that the phrase used was not consistent with the existence of an automatic right to a five-year extension on the existing lease. Indeed, it was submitted that no correspondence was required if the right to an extension did indeed exist. While there is some substance to that view, I believe some allowance needs to be given for the fact that Mr Young comes from a different cultural background. Although Mr Young speaks very clear English, it is not unknown for people who have English as a second language to use different forms of word to express a particular sentiment. Other correspondence written by Mr Young contains phrases which might be thought to be unusually tentative in the context. For example, when negotiating the terms of the new lease, Mr Young wrote to Mr Baruffi in the following terms: "We would like to recommend that minimum rent increase be subject to the consumer price index". On any account this is a rather unusual way of stating the plaintiff's position on rent increases. Further, in view of the way in which the matter had been handled, the approval of the extension in the 18 June facsimile, the omission of the extension from the draft assignment of lease, the offer of a new lease with further options and the suggestion to assign the existing lease whilst negotiating the terms of a new lease, it is not surprising that Mr Young thought it prudent to raise the issue of tenure prior to the expiry of the existing lease period. It should also be noted that Mr Young was never asked whether he knew what action, if any, needed to be taken at the end of the existing term where there is an entitlement to an extension.

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Judgment (311 paragraphs)

Kokos International Pty Ltd v Libra Motors Pty Ltd & Anor [2005] WASC 209 (21 September 2005)

(d) The Substituted Reply and Defence to Counterclaim

(i) The conversation between Mr Young and Mr Baruffi on 17 June 1999

(ii) The conversation between Ms Derksen and Ms Baruffi on or about 27 July 1999.

(iii) The effect of the subsequent correspondence concerning a new lease with further option periods.

Parties

Legislation Cited (1)

Cases Cited (11)