Long & Anor v Piper & Anor

PARTIES : Michael Howard Long & Anette Cheryl Long - Appellants Terrence John Piper & Lynette Jean Piper - Respondents JUDGMENT OF : Priestley JA at 1; Giles JA at 2; Foster AJA at 77

LOWER COURT JURISDICTION : District Court LOWER COURT DC 22/97 (Dubbo); DC 9278/99 (Sydney) FILE NUMBER(S) : LOWER COURT Taylor DCJ JUDICIAL OFFICER :

COUNSEL : G K Downes QC & P A Regattieri - Appellants D F Rofe QC & R W Cameron - Respondents SOLICITORS : M J Duffy & Son, Dubbo - Apellants Sweeney Waterford, Wee Waa - Respondents CATCHWORDS : CONTRACT - whether a concluded agreement for lease - parties had solicitors - formal lease to be prepared and executed - finding that earlier entry into possession was as caretakers not lessees - consideration for grant of lease not paid - held binding obligations to arise on "exchange" of lease documents and payment of the consideration - no agreement for lease prior to that time. D Abalos v Australian Postal Commission (1990) 171 CLR 167; Allen v Carbone (1975) 132 CLR 528; Arjay Investments Pty Ltd v Morrisons's Outdoor Catering Pty Ltd (Young J, 1 May 1995, unreported); Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 97089; Dallwest Pty Ltd v Cafabe Pty Ltd (Bryson J, 26 November 1997, unreported); Devries v Australian National Railways Commission (1993) 177 CLR 472; CASES CITED: Eccles v Bryant (1948) Ch 93; Gobblers Inc Pty Ltd v Stevens (1993) 6 BPR 79488; Landsworths Pty Ltd v Hall (1999) NSWSC 735; Masters v Cameron (1954) 91 CLR 353; Nicholas Global Engerprise Pty Ltd v Biviano (2000) NSWSC 956; Smith v Lush (1952) SR (NSW) 207; Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 970983; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. DECISION : Appeal dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40560/00 DC 22 of 1997 (Dubbo) DC 9278 of 1999 (Sydney) PRIESTLEY JA GILES JA FOSTER AJA

Friday 28 September 2001 LONG & ANOR V PIPER & ANOR

JUDGMENT 1 PRIESTLEY JA: I agree with Giles JA. 2 GILES JA: The appellants, Mr Michael Long and his wife Mrs Annette Long, owned the Imperial Hotel at Pilliga in New South Wales. Mr Long was the licensee of the hotel. They sued the respondents, Mr Terrence Piper and his wife Mrs Lynette Piper, claiming damages for breach of an agreement by which the respondents would lease the hotel for five years from 1 July 1993. Taylor DCJ held that a concluded agreement for lease had not come into existence, and gave judgment for the respondents with costs.

Facts 3 The appellants became the owners of the hotel in June 1991. They installed a lessee. In May 1992 the hotel was destroyed by fire. It was rebuilt by December 1992, but the lessee did not go back into possession. Mr Long became the licensee and ran the hotel himself. 4 At some time prior to June 1993 the appellants placed the hotel with a number of hotel brokers for sale or lease. The respondents saw one of the brokers' advertisements. In late May or early June 1993 the respondents inspected the hotel. They were prepared to buy the hotel for $420,000, but could not obtain the necessary finance. An arrangement was negotiated by which they would lease the hotel for five years with an option to purchase at the end of the term, paying $90,000 for the lease with a correspondingly reduced payment for the freehold if the option was exercised. It was not suggested that a concluded agreement for lease came into existence at this stage. 5 In the course of negotiating the arrangement there was discussion of work to be done by the appellants. As with a great many other matters in the proceedings, the evidence was left in an unsatisfactory state. The work appears to have been cleaning up building rubble, repairing a fence, attending to work required by the council in relation to the septic tank, some work to do with the air conditioning, and something to do with doors. According to Mr Long, there was a "verbal agreement" that he would do the work, but he was not to do it before the respondents took over the hotel but at a later time. According to Mr Piper, the arrangement was "subject to … certain things being finished at the hotel" , it seems meaning the work. 6 Both parties retained solicitors. The appellants' solicitor was Mr Peter Poulton of MJ Duffy & Son in Dubbo. The respondents' solicitor was Mr David Sweeney of Waterfords at Wee Waa. As was customary, Mr Poulton was to prepare the lease. It was necessary to apply for provisional transfer of the hotelier's licence from Mr Long to Mr Piper, and the solicitors agreed that Mr Piper would prepare the necessary documents. 7 Towards the end of June 1993 Mr Poulton saw Mr Long and Mr Piper and took instructions for the preparation of the lease and the licensing documents. On 24 June 1993 he faxed to Mr Sweeney's offices a "draft Lease of Imperial Hotel, Pilliga" . The fax cover sheet continued, "Following in the mail are the relevant Liquor Transfer Applications and Title Searches etc" . The letter enclosing the last mentioned documents, undated but no doubt contemporaneous, said - "We enclose the following;- 1 Application and Affidavit of Transferee 2 Transferee's Affidavit of Personal Perticulars [sic] 3 Partnership Agreement 4 Searches and Diagrams". 8 The draft lease began with the appropriate two page Real Property Act form. It named the appellants as lessors and the respondents as lessees and provided for a term of five years commencing on 1 July 1993. Where the form provided "5 With an Option to Purchase Set Out In …" it was left incomplete. The form also provided for incorporation of the provisions set out in an annexure, and the two pages of the form were followed by seventeen pages of an annexure. The annexure was described as an annexure "forming part of the lease between Michael Howard Long (Lessees) and James Nedby Johnston and Erica Maree Johnston (Lessors)" , and at least in part must have been an adoption of provisions prepared for a different transaction. It provided for payment of rent of $41,600 per annum payable at the rate of $800 per week in advance, subject to annual review in accordance with the Consumer Price Index. It included an option to purchase the hotel for $420,000, subject to variation of the purchase price in certain events, granted in consideration of $1 payable by the lessee "on the commencement of the term" . The purchase price was apportioned between the hotel premises, plant and equipment, and goodwill. The option fee and the moneys paid pursuant to cl 18 were to form part of the purchase price and be deducted from it. By the final clause 18 - "18. The Lessee shall, in consideration of the grant of the lease herein by the Lessor to the Lessee, pay to the Lessor upon the commencing date a premium of eighty nine thousand nine hundred and ninety nine dollars $89,999.00". 9 So far as presently relevant, by the application part of the licensing documents Mr Piper applied for "the (provisional) transfer to me of a Hotelier's Licence in respect of the premises at Imperial Hotel, Dangar Street, Pilliga" , and the accompanying affidavit was completed to read - " PART 2 The Licensed Premises 1. Who will own the freehold of the premises if the application is granted? Michael Howard Long and Annette Cheryl Long. (If a private company, the registered address of company, the names and addresses of directors and shareholders, dates and places of birth are to be supplied). 2. Will the licensed premises be subject to a mortgage (answer Yes or No) Yes. If Yes state details. National Australia Bank has a First Mortgage in respect of the freehold. Details not known to me. 3. If you will not own the freehold of the licensed premises, state full details of: (a) The proposed lease is between Michael Howard Long and Annette Cheryl Long as Lessors, and Terrence John Piper and Lynette Jean Piper as Lessees. (b) Address of Lessor (If a private company registered address, names and addresses of directors and shareholders, dates and places of birth) Presently C/- Imperial Hotel Pilliga. (c) Name/s and address/es of lessee/s Terrence John Piper and Lynette Piper of 14 Queenscliffe Close, Kewarra Beach, Queensland. (d) Name/s and Address/es of co-lessee/s? Not applicable (e) Duration of Lease? Five (5) years. (f) If mortgage of the lease, please state full details. Not applicable (g) Rent payable under the lease $800.00 per week (h) To whom is the rent paid? Michael Howard Long & Annette Cheryl Long. 4. Who will be entitled to the rents of the premises? Michael Howard Long & Annette Cheryl Long. 5. Who will be entitled to the profits of the premises? Myself this deponent, and Lynette Jean Piper. 6. Are the answers to Questions 1,2,3,4 and 5 in this part from your personal knowledge? (If no, separate affidavit must be filed by a person having personal knowledge of these facts) Yes." 10 The partnership agreement was a short document recording the agreement of the respondents to become partners in the business of hoteliers at the hotel, with Mr Piper to hold the licence and run the hotel. Other information in the affidavit accompanying the application part of the licensing documents referred to the respondents as partners. The copy of the partnership agreement in evidence was dated 29 June 1993 and signed by the respondents. The witness to their signatures appears to have been Mr Sweeney. The evidence did not otherwise reveal when or in what circumstances the partnership agreement was signed. 11 By a letter dated 29 June 1993 Mr Sweeney requested amendments and additions to the draft lease and clarification of an aspect of the title to the hotel. One of the requests sought a warranty of reimbursement if the respondents incurred costs in complying with statutory health, building or safety requirements, apparently related in part to the work earlier mentioned. Another was - "8. Our client requests a warranty from yours that in the event that a neighbour, upon whose property is situated the rubble from the fire damaged building, requests removal of the rubble, that the lessors will immediately comply without costs to the lessee with the neighbours [sic] request."

According to Mr Piper, he had told Mr Sweeney of the work to be done by the appellants. These were the only references to the work in Mr Sweeney's letter. 12 By a letter dated 1 July 1993 Mr Poulton responded to Mr Sweeney's requests. He agreed to two amendments, but declined to agree to the remainder. One of the agreed amendments changed the wording of a provision of the annexure concerning inspection by the lessors. The other changed the apportionment of the purchase price. Mr Poulton stated as to the rubble, "the Lessors will remove the small amount of debris themselves before handing over pursuant to the lease" . 13 The copies of the draft lease in evidence are altered in manuscript in accordance with the agreed amendments in words proposed by Mr Poulton. When and in what circumstances this was done did not appear, but presumably the alterations were made by Mr Sweeney. 14 On 5 July 1993 the respondents completed applications for electricity supply for the hotel from Namoi Valley Electricity. The application forms in evidence had the date on which supply was required as "5/7/93" with the figure "7" also written above the figure "5" . When and in what circumstances the additional figure was written in was not disclosed in the evidence, save that Mr Piper appeared to accept that he wrote the additional figure and said he chose it because "they had to have a date put in there to begin the power at some stage." Nor was there any evidence of communications between the parties about the date or, subject to what I next mention, about the applications at all. Mr Long said that he and Mr Piper went to Namoi Valley Electricity before 6 July 1993, that he took Mr Piper and showed him where Namoi Valley Electricity was "and we went and made an application for the power to be put into his name" . That is where it was left. 15 The respondents signed a copy or copies of the draft lease at Mr Sweeney's offices, it seems a photocopy or photocopies of the draft lease faxed by Mr Poulton. They signed at the foot of the first page of the form and in the space on the second page of the form provided for the signature of the lessees and initialled at the foot of each of the pages of the annexure. They did not initial the alterations, assuming (as is likely) that the alterations had by then been made. 16 Mr Sweeney saw the respondents on this occasion, but did not witness their signatures. He gave evidence - "Q. Can you recall the circumstances in which their signatures got to be on the particular document? A. Yes, I can recall there was some need for expedition with the formalities of the lease but I was very conscious that whilst it might be convenient for the Pipers to sign because they were moving between towns and not constantly in Wee Waa that when the time came for the lease to be executed I would have a document with their signatures on it. And I remember quite clearly that's why I never witnessed their signatures. It was always, in my mind, being held in escribe [sic] until I had instructions to proceed."

It was common ground that "escribe" was an error and that Mr Sweeney said or meant "escrow" . 17 There was some confusion in the evidence concerning this occasion and an occasion on 6 July 1993 when Mr Long and Mr Piper went to Mr Sweeney's offices. 18 Mr Long and Mr Piper went to Moree on 6 July 1993, provided the licensing documents and a copy of the draft lease, signed at least by Mr Long and Mr Piper, to a clerk at the courthouse, and received a document evidencing an order granting a provisional transfer of the hotelier's licence from Mr Long to Mr Piper for a period of three months. 19 According to Mrs Piper, she and Mr Piper went to Mr Sweeney's offices on the previous day, 5 July 1993, and signed the draft lease. This is consistent with Mr Sweeney's evidence last mentioned. Mrs Piper said that the respondents signed the draft lease because "the next day my husband and Mr Long were going to Moree to make arrangements for a provisional licence in my husband's name" , and at another point that the document "had to be signed in order for the provisional licence to be granted" , which is not so consistent with the reason given by Mr Sweeney. 20 According to Mr Piper, he, Mrs Piper and Mr Long all went to Mr Sweeney's offices because Mr Long said that it was necessary to go to Moree "and that with the application there had to be a copy of the lease so that the liquor licensing or whoever is in charge of that could see there was actually something going to transpire for the licence to be transferred into my name" , and the three of them signed the draft lease. At another point Mr Piper said that he could not recall Mr Long signing the draft lease. Mr Piper said that "the object of this just being signed was purely to go with the application for the licence" , and that it "was only signed by my wife and I just purely for - to - for it to go to the Licensing Commission, the Liquor Licensing Commission" . He and Mr Long went to Moree on the same day. This is not consistent with a separate occasion on 5 July 1993 on which the respondents alone signed a copy or copies of the draft lease. 21 According to Mr Long, he and Mr Piper went to Mr Sweeney's offices and signed "a copy of the lease" which "had to be - accompany the application for liquor licence" . Each signed in the place for signatures and initialled every page. They then went on to Moree, Mr Long was adamant that the document taken to Moree was signed only by himself and Mr Piper. This is not consistent with a separate occasion on 5 July 1993 on which Mr Piper signed a copy or copies of the draft lease. On Mr Long's evidence how a copy or copies of the draft lease came to be signed by Mrs Piper was not explained. 22 Common to these accounts was the perceived necessity for a lease document to accompany the licensing documents, although nothing in the latter documents so stated. I will return to the significance of this to the issue of a concluded agreement for lease: for the present, the question is what happened. The confusion over the occasions is given point by the presence in the evidence of a copy of the draft lease signed only by the respondents in the manner earlier described, plus another copy of the draft lease signed by them in the manner earlier described and also signed by Mr Long. In neither copy are the signatures witnessed. 23 Taylor DCJ found that - "On about 6 July Mr Long and Mr Piper went to the office of Mr Sweeney, the defendant's solicitor. The lease was at that point apparently signed at least by Mr and Mrs Piper, however, Mr Sweeney's evidence was and the Court accepts, that it was a matter of convenience and he purposely did not witness their signatures because it was not his instructions to communicate to anyone that the matter was finalised. The convenience was the facilitation of the transfer of the liquor licence . Mr Long and Mr Piper co-operated in travelling to Moree to ensure that the licence could be obtained promptly, this was because they would have taken some time to make that arrangement before the Magistrate at Narrabri." 24 His Honour therefore accepted the occasion of signing the draft lease by the respondents on 5 July 1993, and found that the occasion on 6 July 1993 involved only Mr Long and Mr Piper. Mr Sweeney had a file note of the latter occasion reading "attendance on Michael Long, he to lodge papers Moree today" . One explanation, although not expressly found by his Honour, is that the respondents signed a copy of the draft lease on 5 July 1993, then on 6 July 1993 Mr Long added his signature to one of the copies or a copy of one of the copies and the document with three signatures was taken to Moree. Another explanation is that a fresh copy of the draft lease was signed by Mr Long and Mr Piper, although no copy as so signed was in evidence. 25 There was no more explicit evidence of what was said between the parties as to the reason for signing the draft lease, in particular bearing upon whether the signing and provision to the court at Moree was to signify commitment to the grant and talking of the lease. As I have said, I will return to the significance of the perceived necessity for a lease document to accompany the licensing documents. 26 According to Mr Long, after he and Mr Piper had received the document evidencing the provisional transfer the lease document which had been provided to the court was taken by Mr Piper "because his wife hadn't signed it at that stage and he had to take it back to Mr Sweeney" . This is consistent with his evidence that the copy of the draft lease taken to Moree was signed only by himself and Mr Piper. According to Mr Piper, the document "probably stopped with Mr Sweeney because it's a - you know, its got our original signatures on it" . 27 Mr Long and Mr Piper returned to the hotel late on 6 July 1993. Mrs Piper was at the hotel, having "looked after it" while they were away. There took place what Mr Long called a stock take and the respondents called a stock check. According to Mr Long, Mr Piper went through the stock (alcoholic drinks, non-alcoholic drinks, cigarettes, food stuffs and so on) calling out quantities which he (Mr Long) recorded; Mrs Piper helped to count some items. According to Mrs Piper, Mr Long called and she recorded. 28 After the stock take or stock check was completed, Mr Long gave the keys to the hotel to the respondents. According to Mr Long, this followed a conversation with Mr Piper on the way back from Moree - "Q. Well you tell us in what way it's inaccurate? A. We did not talk about the liquor licence I said 'Well you're right now to go in' and he said 'Yep' he said 'Everything's right'. I said 'Well if you want to start now, if that's right- whatever you want to do it's yours now - you're ready to go, we'll do the stocktake tonight and you might as well take over from today or from tomorrow morning' and he said 'Yes that's right' and I said 'Well if that's the case I'll grab Annette and the kids and we'll go up and see mum and dad'." 29 Still according to Mr Long, the next day he had a telephone conversation with Mrs Piper about brewery supplies, they agreed that everything was alright, and on the following day he left for Queensland with his family for a holiday. The thrust of Mr Long's evidence was that the respondents entered into possession of the hotel as lessees on the evening of 6 July or on 7 July 1993. 30 The thrust of the respondents' evidence was quite otherwise. Before going to it, some matters of which there was no evidence should be noted. 31 First the draft lease said nothing about taking over stock or payment for stock. There was no direct evidence of conversations between the parties about it, beyond a reference by Mr Long to "Mr Piper and I were going to do it" . Mr Long said that he was just ascertaining quantities, that he "was going to give the Pipers 120 days to pay for the stock so there wasn't any rush to price it" , and that he would have priced the stock "off the invoice" . 32 Secondly, there was no direct evidence of conversations between the parties at this time about, or even referring to, payment of the $1 option fee, of the more significant $89,999, or of the rent payable in advance. I will later refer to Mr Long's evidence of a telephone conversation with Mr Piper on 9 July 1993 concerning the $90,000. Taylor DCJ did not accept that evidence. 33 To go to the respondent's evidence concerning the stock check and handing over the keys, according to Mr Piper on the journey back from Moree Mr Long said that he (Mr Piper) now had a licence - "Q. And what was said after that? A. That I could take over any time I like. I said well, you know, we're not taking over or anything until these outstanding items are done. You know, we went through the list or not a written list but a verbal list of the things that were still not done at the hotel and he said, 'Well you know, I'll get these things done, I'll get these things done.' And I said, 'Well you know, you've been saying that for quite a number of weeks and now and nothing's happened.' And further down the track and whatever conversations were going backwards and forth and he's indicated that he - he needed to go away with his wife for a few days and his children before the school holidays were over and said that, "Well, you know, the licence is in my name, that it was quite okay for me to run the hotel.' And I said, 'Well, you know,' I said, 'I can look after it for a few days for you,' but I said I'd have to speak to Lyn first regards to it and I rang - by the time we got down to Wee Waa I give Lyn a ring and mention it to her and she said well, she couldn't see a problem with it, you know. If it's going to help him out, we'll look after it for a few days or up to a week." 34 Mr Piper gave evidence to the effect that the stock check took place to make sure that there was sufficient stock for the period while Mr Long was away, and that the keys were given to the respondents so that they could look after the hotel. 35 According to Mrs Piper, she was telephoned by Mr Piper before he returned from Moree about "a proposal about staying on as a care …" while Mr Long went to Queensland for the balance of the school holidays, to which she was agreeable, and when Mr Long left she and Mr Piper "were there looking after it [the hotel] for him" . Mrs Piper said that "[t]here was to be a nominal fee" for the caretaking, as discussed between Mr Long and Mr Piper, but there was no more detail of that matter and no evidence from Mr Piper of such a discussion. A discussion about a caretaking fee was not put to Mr Long in cross examination, but his evidence earlier described and of what occurred on his return from Queensland was inconsistent with an arrangement for a caretaking fee. 36 Taylor DCJ's findings as to these events were linked with his findings as to the telephone conversation between Mr Long and Mr Piper on 9 July 1993 and as to what occurred when Mr Long returned to the hotel on 10 July 1993. I will go to the later events, also the subject of dispute, before referring to his Honour's findings. 37 Material to the later events, are two file notes made by Mr Sweeney dated 8 July 1993. Both file notes and a letter of that date from Mr Sweeney to Mr Poulton recorded telephone attendances on Mr Piper. One file note recorded Mr Piper's complaints that items of work at least part of the work earlier mentioned had not been attended to by the appellants, together with some other complaints. The other file note recorded that "He wants to pull out of lease" , for reasons to do with but going beyond the failure to attend to the work. By the letter Mr Sweeney informed Mr Poulton that "the lessor has not satisfied many of the stipulations of the lessee pertaining to the proposed lease" , naming five items of work, and that the respondents "will not be entering into a lease agreement until these matters have been attended to and so will not be signing the lease which you are forwarding" . 38 According to Mr Long he telephoned Mr Piper on 9 July 1993, a Friday. His evidence continued - "Q. And why did you do that? A. He was to deposit the $90,000 lease money on Thursday into my bank account and I'd rang the bank and it hadn't been done and then I rang him to see why it hadn't. Q. And what was the conversation you had? A. Terry answered the phone and I said 'The money hasn't gone into the bank yet' and he said ' No we're not going to go through with it' I said 'Go through with what?' and he said 'With the deal, we're not going to lease the hotel' and I said 'Why?' He - I can't exactly remember the words he used why he wasn't but it was along the lines of 'It's not what you said it was, we're not happy,' it's not - I'm not 100% percent [sic] certain that's what it was but it was along those lines, Q. Right? A. And I said 'Are you going to put the money in?' and he said 'No I'm not' and I hung up and rang Mr Po[u]lton." 39 Mr Piper agreed that there was a telephone conversation. According to Mr Piper, however, Mr Long did not ask about the money for the lease, but "was ringing me to find out how things were going at the hotel" . In the conversation Mr Piper told Mr Long of concern "about some things that people had mentioned to me" , and complained that the work earlier discussed had not been done; when Mr Long said he would do the work in the next couple of weeks, "I said you get those things done and I said but until those things are done well we are not going any further and that was about the amount of the conversation that I had with him" ; Mr Piper said that no money would be paid until "these things were done" , in context meaning the work earlier mentioned. Mr Long said that he would be back to do the work as soon as possible, or in the next weeks, and Mr Piper said to get in touch when he had done the work. The implicit intention to proceed when the work was done is not consistent with the file note of 8 July 1993. 40 The appellants submitted that Mr Piper's denial that the telephone conversation of 9 July 1993 was about payment of the $90,000 was effectively undermined by recognition of such a conversation at another point in his evidence. The evidence on which they relied should be seen in context, and was the underlined part of the following cross examination - "Q. There was no conversation about caretaking on your behalf with Mr Long? A. Yes there was. Q. And that he let you in because you had said you had your money to pay for the lease, correct? A. You asked me before whether I have had dealings with business and whatever, the normal procedure if the lease was to go ahead and whatever I would have paid on that day. Why would he let me in there without any exchange of money? Q. Because you told him you were going to put it into the account the next day, is that right? A. I think Mr Long has probably been in business long enough too not to believe somebody in that case. Q. And that's why he rang you on the Friday morning to see whether it had been done? A. He rang me to find out how the hotel was going because it was still his." 41 I do not think that the underlined part of this passage does the work required of it. It is not a clear answer, but Mr Piper affirmed that Mr Long had telephoned to find out how the hotel was going, and the answer amounted to rejection of the suggestion that Mr Piper had told Mr Long that the money would be put into the account on the next day on the ground that Mr Long would not have handed over possession on a promise of the money as distinct from the money itself. 42 Mr Long immediately drove back to Pilliga, and went to the hotel on 10 July 1993. According to Mr Long, he asked the respondents "what was going on" , and they said "that they weren't happy with it and they were leaving" and referred to some of the outstanding work. Mr Long's evidence was to the effect that, from earlier discussions, the respondents knew that he was going to do the work the following week and had been happy with that. Mr Long agreed that Mr Piper said to let him know when he had done the work "and we'll let the solicitor know and we will complete the lease" . He gave no evidence of saying anything about payment of the $90,000. According to Mr Piper, Mr Long asked about the work to be done and said that he would have it all done, and Mr Piper said that when it was done "we can look at leasing the hotel … but until those things are done well we are not going any further" . The respondents handed over the takings for the period of Mr Long's absence, and left the hotel. A caretaking fee was not taken: according to Mrs Piper "we just felt that I really didn't want to take any money." 43 Taylor DCJ's findings as to the events of 6 July to 10 July 1993 were not detailed, and were stated in conjunction with his reasoning to his decision. His Honour said - "Neither Mr Piper nor Mr Long were good witnesses. Mr Piper was argumentative. Both of them gave the impression that the evidence the Court was going to hear was always to be consistent with their case. The Court looks to supporting circumstances in situations such as that and what is inherently likely or unlikely. The Court has concluded that it is inherently unlikely that the parties would have moved outside the process being conducted on their behalf by their respective lawyers in effect to settle the transaction. Although the matter had not been completed by 1 July, it is quite clear that both solicitors were attentive to their instructions and were in communication. Both Mr Long and Mr Piper were experienced in the business of the hotel industry. Mr Long says that Mr Piper telephoned him concerning the non payment of the $89,999. It is commonsense that this would have been preceded by an agreement to pay that sum before the lease was finalised. There is no evidence of this. The work that the Court has seen of the solicitors in this case leads it to conclude that had there been such an agreement it would have been found in the various documents produced by the solicitors. The very strong inference is that the $89,999 contended by Mr Long to be mentioned by him in the conversation is that sum referred to in the lease document. The Court does not accept that Mr Long had an expectation that the sum was to be paid before the solicitors finalised matters. Given Mr Piper's denial that the demand was made there is no recording of it in the contemporaneous solicitor's notes and the inherent unlikelihood that the key money would be paid prior to settlement, the Court had concluded that Mr Long is mistaken about that aspect of the conversation. The more likely situation is, and the Court so finds, that Mr and Mrs Piper agreed to run the hotel in Mr Long's absence for a few days or for a week. Perhaps this would have continued when Mr Long returned and finalised the detail of agreed works. Settlement would then have taken place. No doubt both solicitors would have been concerned about an early entry into possession, but nevertheless it is likely that a continuity would have been maintained until settlement. However, although there is evidence consistent with both points of view advanced, the preponderance of evidence favours the defendants. True it is a provisional licence was obtained. A stocktake was conducted and various statutory authorities were approached. These were practical steps to be taken in expectation of the lease being formally exchanged and settled. Some of the matters, as noted, particularly the entry into possession the solicitors would not have been happy with. The early entry into possession was precipitated by the plaintiffs own personal circumstances outside the lawyers' processes. Mr Sweeney's notes indicate that Mr Piper was looking for reasons to avoid the lease once he and his wife decided not to proceed. The Court is satisfied that they reached that decision whilst Mr Long was in Queensland. The Court does not interpret that as an indication that they were thereby acknowledging that they already had a binding obligation. Consistent with the way Mr Piper gave his evidence he appears to have been building a case for an anticipated dispute with Mr Long. The Court accepts Mr Sweeney's evidence the lease documents were signed in the circumstances noted earlier. The Court has concluded and finds that during the period that Mr and Mrs Piper were in possession of the premises whilst Mr Long was in Queensland was a temporary arrangement and was independent of any obligations that either party had associated with the lease documents." 44 The key findings are that the respondents entered into occupation of the hotel as caretakers and that nothing was said about payment of the $90,000. 45 Implicit in Mr Sweeney's letter of 8 July 1993, although it was not the subject of direct evidence, was that as between Mr Poulton and Mr Sweeney the former was to send an engrossed lease for execution. That Mr Poulton was to do so is further suggested by a form of letter from Mr Poulton to Mr Sweeney dated 12 July 1993 produced from the appellants' discovered documents, which Mr Sweeney had no recollection of receiving and was apparently an unsigned original prepared by Mr Poulton but not sent. It recorded that it enclosed (amongst other documents) "Lease in duplicate, signed by the Lessors" , and asked Mr Sweeney to "let us have the lease when it is executed, to have duty assessed on it." The letter included, "We note that the premium payable under the lease, with option fee of $90,000.00 is to be paid direct into the Lessors' account at the National Australia Bank Dubbo Branch." 46 There is no point in going into details as to further events. The respondents declined to proceed, and in due course the appellants sued them.

Discussion 47 The appellants submitted that the terms of the agreement for lease were to be found in the draft lease as amended, and that there was no question of terms of the lease remaining to be agreed. The arrangement about doing work, they said, was best seen as a collateral agreement whereby the appellants agreed to do the work in consideration of the respondents' entry in to the agreement for lease, and was not part of the terms of the lease. I do not think that the respondents submitted that the doing of the work was part of the terms of the lease. 48 The issue is whether there was a concluded agreement for lease in that the appellants were legally bound to grant and the respondents were legally bound to take a lease of the hotel on the terms of the draft lease. The fact that there was agreement on the terms in the draft lease does not mean that there was a concluded agreement for lease. As was said by Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 - "It is to be noted that the question in a case such as the present is to be expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron [(1954) 91 CLR 353] (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties had reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract."

See also Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 970983 to which I refer later in these reasons. 49 Whether there was a concluded agreement for lease depends on the intention of the parties, prima facie to be determined objectively without regard to the subjective intention of one or other of the appellants and the respondents. There is no doubt that in early July 1993 the parties anticipated that a lease of the hotel would come about, and were acting to that end. A concluded agreement for lease could come into existence prior to the execution of the formal lease, but whether or not it did calls for an objective determination of the intention of the parties from their communications and dealings in June and July 1993. 50 As Gleeson CJ also said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 550, referring to Allen v Carbone (1975) 132 CLR 528 at 531-532, in these circumstances "it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications" . 51 Here the subject matter of the communications was a lease of a hotel for a lengthy term, at a significant rent, and with an option to purchase for a large purchase price. The commercial circumstances included that both parties had solicitors, and that the solicitors were engaged in the normal conveyancing steps towards execution and registration of a formal lease. That process was not preceded by anything like an exchange of letters recording an agreement for lease to be given effect by the formal lease. 52 In Allen v Carbone , a sale of land case, a material consideration was that the usual method of selling land in New South Wales was by the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales (at 533, citing Eccles v Bryant (1948) Ch 93 at 99 and Smith v Lush (1952) 52 SR (NSW) 207 at 212). The appellants accepted that the cases speak of a presumption that the parties do not intend to make a concluded agreement for the sale of land without an exchange of contracts, but submitted that there is no like presumption in the case of a lease of land. 53 There was an element of tilting at windmills in this. There is a distinction between conveyance of a legal title (whether by sale or by lease) and an agreement for conveyance of the legal title, and an established practice of signing and exchange of contracts for sale of land followed by conveyance of the title on completion of the contract has no necessary or direct equivalent in relation to leases of land. In the present case it is plain that the parties did not intend that there should be a formal contract, preceding the formal lease, by which they agreed to grant and take a lease of the hotel. But that does not make irrelevant the subject matter and commercial circumstances earlier identified. 54 As the appellants also acknowledged, in a number of lease cases it has been regarded as relevant that there is to be "the completion of some ceremony which marks the stage at which a contract comes into existence" . The words are those of Glass JA in Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd at 9,175, in which case it was held that , although there was agreement on the terms of the lease - "The terms of the correspondence between the solicitors already noted objectively evince an intention that neither client was to be bound by the memorandum of lease at the moment when all its terms had been settled by the solicitors. Some further ceremony was required whether it was to be contemplated lodgement for registration of a memorandum duly executed by the lessor's solicitors or the earlier ceremony whereby both lessor and lessee reciprocally bound themselves by a bilateral execution of a registrable memorandum of lease. The correspondence shows that some ceremony or other was contemplated whereby both clients agreed to be bound by the terms hammered out by their solicitors. Agreement on terms was insufficient without an agreement to be bound by them." 55 Reference maybe made in this regard to Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 97089 at 9149; Arjay Investments Pty Ltd v Morrison's Outdoor Catering Pty Ltd (Young J, 1 May 1995, unreported); Dallwest Pty Ltd v Cafabe Pty Ltd (Bryson J, 26 November 1997, unreported); Landsworths Pty Ltd v Hall (1999) NSWSC 735 at [9]; and Nicholas Global Enterprise Pty Ltd v Biviano (2000) NSWSC 956 at [30-31]. In the first of these cases an analogy was seen with Eccles v Bryant . In some of these cases it has been said that there are guidelines, most expansively expressed in Arjay Investments Pty Ltd v Morrison's Outdoor Catering Pty Ltd that "where one has a lease of commercial premises one normally expects that the lease will only come into existence after there has been an exchange of formal documents" and "if one can see in the negotiations that the parties had in mind the preparation of a more formal document by a solicitor, one tends to think that they did not intend to be bound until the formal document was produced and exchanged" . I prefer not to speak of guidelines. It must depend on the particular situation, but if the parties are following normal practice for the creation of a building lease, particularly a relatively major lease of a hotel with an option to purchase, that is an indication that they do not intend to be bound until execution of the formal lease. 56 The appellants were critical of Taylor DCJ's references to settlement of the transaction, submitting that his Honour wrongly concentrated on conclusion of a formal lease when he should have been concentrating on conclusion of an agreement for lease. I do not think the criticism is justified. In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 436 Deane J likened the holding by the lessor's solicitor of an original and a counterpart lease for stamping to a notional exchange, and return by the lessee's solicitor of the one document, following execution by the lessee, would bring the same definitive status of a concluded agreement for lease pending stamping and registration. This description of notional exchange was taken up in Gobblers Inc Pty Ltd v Stevens (1993) 6 BPR 79488 at 13,594. It is clear enough that the solicitors in the present case were following the ordinary practice of this land. In my opinion his Honour meant by settlement the conclusion of the process between the solicitors by way of notional exchange, and had in mind the indication to which I have referred. 57 However, that is only one of the available indications, and there is no doubt that prospective parties to a lease to be entered into by the process being followed by the solicitors in the present case may arrive a concluded agreement for lease prior to completion of the process. It is necessary to look to the other indications in the communications and dealings between the parties. 58 There was work to be done by the appellants. Perhaps it is unlikely that the respondents would agree to be bound to take a lease until the work was done, but the appellants would not have necessarily have the same reservations. Little was made of doing the work in the exchange of the letters of 29 June and 1 July 1993, and it is tolerably clear that the respondent's later emphasis on the work was associated with a wish not to proceed. Mr Poulton's letter did promise removal of the rubble "before handing over pursuant to the lease" , which could suggest that there were no binding obligations until that work had been done. On the unsatisfactory state of the evidence, there could be an indicator against a concluded agreement for lease, but I do not think it could safely be given significant weight. 59 The respondents signed the lease on 5 July 1993. However, there is nothing to show that this was known at the time to the appellants or to their solicitor Mr Poulton: indeed, Mr Sweeney's letter of 18 July 1993 and the unsent letter of 12 July 1993 show that the solicitors contemplated execution of a further document to be prepared by Mr Poulton, no doubt because the original document was in faxed form and the agreed amendments had to be incorporated. Mr Sweeney's express understanding of the occasion for the signing, that it was a matter of convenience in that "when the time came for the lease to be executed I would have a document with their signatures on it" , does not sit comfortably with the expectation that an engrossment of the lease would be executed as the formal lease. Further, from the evidence of Mr Long and the respondents Taylor DCJ saw the convenience as the facilitation of the transfer of the hotelier's licence: his Honour accepted Mr Sweeney's evidence, but Mr Sweeney's precise recollection may be doubted. Notwithstanding the doubt, an inference from Mr Sweeney's evidence remains, that the signature of the draft lease by the respondents was not regarded by the parties as a step creating legal obligations between them. 60 The appellants submitted that Mr Sweeney's evidence of his state of mind in this respect would have been inadmissible if objection had been taken, and that even as part of the evidence it was irrelevant and of no weight. Objection was not taken, and regard may be had to the evidence for such significance as it may have. Mr Sweeney was not cross examined to ascertain what lay behind his state of mind, nor was either of the respondents asked about what might have been said to cause Mr Sweeney to have the state of mind he professed. Something must have been said to Mr Sweeney to cause him to believe that, as he put it, the signed document was being held in escrow until he had instructions to proceed. In my opinion it is proper to infer from his evidence that something was said to that effect. Since he clearly remained of his state of mind after he saw Mr Long sign, and did so with knowledge of the intended use of the signed copy of the draft lease, his evidence reflected more than the respondents' subjective views. The inference is not weighty. Since so far as appears there was no communication at the time to the appellants or Mr Poulton of the fact of signature on 5 July 1993, or of the significance or lack of significance attached to it, in objectively determining the intention of the parties the signature by the respondents and Mr Sweeney's evidence are properly seen as an aspect of the provisional transfer of the hotelier's licence. 61 The application for transfer of the licence called for particulars of a proposed lease, not particulars of an existing lease. A proposed lease could be a lease which the lessor was bound to grant and the lessee was bound to take pursuant to a concluded agreement for lease, or it could be a lease which the parties anticipated would be granted in due course if, amongst other things, the application for transfer was successful. Providing the particulars in the present case did not acknowledge a concluded agreement for lease, and does not contribute to a finding of an intention that there be a concluded agreement for lease. 62 Rightly or wrongly, and it seems because Mr Long so believed, the parties thought that the application had to be accompanied by "a copy of the lease" . So the respondents signed a copy or copies of the draft lease on 5 July 1993 and Mr Long signed one of the copies or another copy of the draft lease on 6 July 1993. A copy of the draft lease signed either by all three of them or by Mr Long and Mr Piper did accompany the application. Mrs Long did not sign the draft lease. For present purposes I do not think it much matters whether the copy of the draft lease accompanying the application was signed by all of the respondents and Mr Long or by Mr Long and Mr Piper. I will assume the former, probably the situation more favourable to the appellants. 63 This could be seen as representing to the licensing authorities, and indicating, that there was more than an anticipation of a lease, and that there were binding obligations in the terms of the draft lease although the formal lease remained to be executed and registered. Or it could be seen as no more than a representation to the licensing authorities, and an indication, that the parties had reached agreement on the terms of the lease which they expected to enter into, without at that time having a concluded agreement for lease. 64 The evidence does not permit a clear choice between these alternatives. That something signed was thought necessary could suggest the former. That the draft lease was not signed by Mrs Long, that the signed document taken to Moree was a copy with manuscript amendments and without the signatures witnessed, and Mr Sweeney's understanding as to the significance of the signing by the respondents could all suggest the latter. Had Mr Long explained the perceived need to the respondents as one involving commitment to the grant and taking of the lease, one would expect him to have given evidence of the explanation, but he did not do so. Mr Piper's understanding that the copy of the lease was required so that it could be seen "there was actually something going to transpire for the licence to be transferred into my name" could reflect a commitment, but the reflection is obscure and is clouded by his evidence that it was only to go with the application: that suggests limited significance. On balance, there may be an indication in favour of a concluded agreement for lease but by no means a powerful one. 65 The respondents applied for the electricity supply on 5 July 1993. There was no evidence of discussions between the parties to the effect that the respondents would arrange for the service for 5 or 7 July 1993 as the date of taking possession as lessees; again if there had been such a discussion, one would expect Mr Long to have given evidence of it. 66 Mr Piper rejected the suggestion that he applied for the service as "the right thing to do at the time you had a lease" , saying that he applied "pending the lease, you know you have got the make the arrangements before those things go into place otherwise you start the place with no power." He said that the respondents "thought we had a lease and we were going to lease the hotel" , and that "you can't make application for the power after it begins, you have got to make these arrangements prior, sometimes weeks" . This did not really explain the date of 5 or 7 July 1993, but as I have noted Mr Piper also gave evidence about giving a date because there had to be a date put in to begin the power at some stage. 67 But for the nominated date, the applications for electricity service would be consistent with no concluded agreement for lease. The nomination of a date suggests something more definitive but, in the absence of evidence of communications between the parties on or before 5 July 1993 to explain the nomination of the date, the added significance to be given to the nomination of the date is somewhat speculative. The date of 5 July 1993 does not fit with any expected taking of possession as lessee. The date of 7 July 1993 could fit with the events of 6 and 7 July 1993, but when and in what circumstances the figure was added is not known. Again, there is some support for a concluded agreement for lease, but of far from conclusive weight. 68 The respondents entered into occupation of the hotel on 6 or 7 July 1993 (I use "occupation" intending that it be a neutral term). Taylor DCJ found that they agreed to run the hotel in Mr Long's absence, and in effect that they did not do so by way of taking possession as lessees. He therefore preferred the evidence of the respondents as to the communications on and after 6 July 1993 concerning the entry in occupation to that of Mr Long. This finding and its constituent sub-findings tell fairly strongly against a concluded agreement for lease. Not withstanding the signature of the draft lease, the application for transfer of the hotelier's licence and the applications for electricity service, the parties did not consider that the respondents were acting under a lease in thereafter entering into occupation of the hotel. Rather, obligations as lessors and lessees were left to the conclusion of the process between the solicitors, albeit that the parties may well have anticipated that the process would come to a conclusion without difficulty. 69 Taylor DCJ's findings must have been influenced in part by the impression made upon him by the witnesses, whereby the appellate restraint for which Abalos v Australian Postal Commission (1990) 171 CLR 167 and Devries v Australian National Railways Commission (1993) 177 CLR 472 are conventionally cited come into play. His Honour said that neither Mr Long or Mr Piper was a good witness and that both "gave the impression that the evidence the Court was going to hear was always to be consistent with their case" , and correctly said that in that situation he looked to "supporting circumstances … and what is inherently likely or unlikely" , but that does not exclude the appellate restraint. 70 Apart from that, however, there were sound reasons for his Honour's findings, reasons which themselves tell against a concluded agreement for lease. The draft lease provided for payment of the $1 "on the commencement of the term" and of the $89,999 "upon the commencing date" , and for payment of the weekly rent of $800 in advance. It is unlikely that, even as an informal arrangement between the parties outside the involvement of their solicitors, Mr Long would have given possession to the respondents as lessees without prior payment of at least the $89,999, which he regarded as $90,000, and without payment of rent. Mr Long gave no evidence of discussion of payment of the $90,000 and the rent prior to the respondents entering into occupation of the hotel. Implicit in his evidence of the telephone conversation of 8 July 1993 was that there had been an arrangement for payment of the $90,000, but there is force in what I believe Mr Piper intended by the unclear answer about Mr Long being in business long enough etc., namely, that Mr Long would not have allowed the respondents in as lessees on a promise of payment of the money. Mr Poulton's unsigned letter of 12 July 1993, some days after these events and when Mr Long must have been in further contact with his solicitor, suggests that payment of the $90,000 was to be contemporaneous with commencement of the lease and did not assert that there had been an earlier (and broken) promise to pay the $90,000, although too much significance can not be given to this in the absence of evidence of the circumstances in which the letter came to be prepared. 71 A stock take or stock check was conducted on the evening of 6 July 1993. On the appellants' case, a stock take supported taking possession as lessees and so a concluded agreement for lease. On the respondents' case, the stock check was only to ensure there was sufficient stock for the period of Mr Long's absence in Queensland. There was no evidence, for example as to the quantities of stock on hand, to indicate that the latter explanation is improbable. I do not think that the stock take or stock check is of much independent significance to the central issue. Such significance as it has follows the finding concerning the basis of entry into occupation. 72 The appellants accepted, correctly in my view, that the file note of Mr Piper telling Mr Sweeney that he wanted to "pull out of the lease" was equivocal, and could mean withdrawal from negotiations to a lease and not be an admission of a concluded agreement for lease. They submitted, however, that Mr Piper had acknowledged the existence of a concluded agreement of lease by the answer concerning the applications for electricity service, that the respondents "thought we had a lease and we were going to lease the hotel, yes …" . I do not think he did. To repeat, no doubt as at 5 July 1993 the parties anticipated that in due course there would be a lease. It does not follow that there was a concluded agreement for lease, and I do not think Mr Piper's answer reflected any more than anticipation.

Conclusion 73 As is apparent, there are indications both for and against a concluded agreement for lease in the communications and dealings between the parties. In the overall assessment necessary for an objective determination of the intention of the parties, in my opinion the balance is against a concluded agreement for lease. 74 The parties were acting through solicitors, and through them the terms of a lease had been settled, but it remained for the formal lease to be prepared and executed. There was to be an occasion on which the $90,000 was paid, according to the terms of the draft lease being the commencement of the period of the lease. While the date in the draft lease for the commencement of the term was 1 July 1993, that date had passed without payment. The reality was that the commencement of the lease, in the sense of the arising of binding rights and obligations between the parties, was to be the occasion for the payment of the $90,000. (It may be doubted that, had the matter gone ahead, the stated commencement date of 1 July 1993 would have remained - why would the respondents have paid rent for a period for which, on any view, they would not have been in possession?) The money had not been paid. This, in my opinion, was a situation in which the parties were to be bound on a ceremonial occasion constituted by exchange (in the sense earlier described) and payment of the money, and the process did not reach that occasion. 75 It was open to the parties to have departed from the process between the solicitors, and by what they said and did to have created rights and obligations as lessors and lessees under a concluded agreement for lease prior to the ceremonial occasion. The agreement for lease would in legalese be of the Masters v Cameron (1954) 91 CLR 353 first class. Whether they did so is a judgmental step in the assessment. I do not think that it should be concluded that they did. There must be confidence that they formed the necessary intention in order to overcome the regard to the subject matter and the circumstances of the solicitors' involvement. The indications supporting the conclusion are not weighty, and are outweighed by the entry into occupation as caretakers and without payment of the $89,999 or rent. They certainly do not warrant the necessary confidence.

The Result 76 In my opinion, the appeal should be dismissed with costs. 77 FOSTER AJA: I agree with Giles JA. _____________

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