Newstart 236 Pty Limited v Chantal Holdings Pty Limited

NO ESTOPPEL 39 In those circumstances, and whatever may have been the reason why Mr Ross failed to have the plaintiff execute the form of option agreement, it is also plain that no conduct on behalf of the defendant can be found to give rise to an estoppel estopping the defendant from denying the existence of an enforceable option, because no such conduct could lead the other party to believe that the first party was representing that there was in existence an enforceable option with specific terms in circumstances in which it was the case, known to both parties, that no such specific terms had been agreed either by execution of the draft option or otherwise. 40 I would only add that, in my opinion, the conduct of Mr Sandvoss in entering into a conditional agreement with Mr Wilson for the sale of the subject land, conditional upon the defendant being able to obtain vacant possession, at a time when it appeared to Mr Sandvoss that Mr Ross was unlikely to be able to raise the necessary finance to purchase the subject land, and notwithstanding that Mr Sandvoss did not disclose this fact to Mr Ross, is not, in my opinion, a matter which would cause me to grant relief against forfeiture in the exercise of my discretion because that arrangement made appropriate provision for the possibility that the plaintiff might nevertheless be able to raise the necessary finance before the cut-off date for the exercise of the option as it was thought to be. 41 In this connection I note that the draft form of contract annexed to the draft option agreement stated that the plaintiff was the tenant of the whole of the premises under a lease expiring on 31 December 2002 with a five year option period at a rent of $15,000 per month. 42 I also record that in my opinion the conduct of Mr Sandvoss was in no way relevantly unconscionable and he is not, in my opinion, in resisting the claim for relief against forfeiture, seeking to take advantage of his own wrongdoing. Mr Sandvoss was in no way responsible for the failure of the plaintiff to pay rent and it was that event that gave rise to the right of the defendant to forfeit the lease and not any conduct of Mr Sandvoss. 43 I also note in passing that, to the extent that it was submitted, on behalf of the plaintiff, that the Court should find that the parties had agreed that the terms of the grant of the option would be as contained in the draft option agreement prepared on behalf of the defendant, that that draft includes the following clause:- "12. The grantee will not be entitled to exercise this Option: 12.1 If the Lease pursuant to which it occupies the Property has been terminated; or 12.2 If it is in default of its obligations under the Lease." 44 These clauses would, in my opinion, produce the result that the plaintiff had lost the right that it might otherwise have had to exercise the option. 45 I acknowledge that if relief against forfeiture had been granted it might have been arguable that clause 12.1 should be construed as if it ended with the words: "and has not been reinstated" (which, presumably, on one view, it would have been if relief against forfeiture had been granted), there is no warrant for adopting the same approach in relation to clause 12.2 of the draft option which would, in my opinion, operate according to its terms and notwithstanding that relief against forfeiture may have been granted. NO RELIEF EVEN IF OPTION ENFORCEABLE 46 Even if I had been of the view that the option was enforceable, I would not have granted relief against forfeiture unless I had been satisfied that as at the present time, namely the time of the application for relief against forfeiture, it is probable that the plaintiff would obtain finance to enable it to exercise the option and/or purchase the subject property. This is because there would simply be no purpose in granting relief against forfeiture if the probability was that, even if that were done, the plaintiff could not obtain finance sufficient to enable it to exercise the option and/or sign a contract to purchase the subject land, because if that were the case the only result of the plaintiff being granted relief against forfeiture would be that it would be allowed back into possession of the premises in respect of which it would not be able to pay rent to the prejudice of the defendant, who would not only be kept out of the premises but would have them occupied by a tenant which is unable to pay the rent. 47 It follows, in my opinion, that the court would not grant relief against forfeiture, even on the assumption that there was an existing legally enforceable option, unless, in addition, the plaintiff could prove that at the present time it was probable that it could arrange finance sufficient to enable it to exercise the option and/or enter into a contract for the purchase of the subject land. 48 In these circumstances, and against the contingency that it may be held in another court that I was in error in concluding that there was no legally binding option in existence, nor any relevant estoppel against the defendant, I record that I am not satisfied at the present time that it is probable that if relief against forfeiture were granted to the plaintiff, it could raise the necessary finance to exercise the option and/or enter into a contract for sale and purchase of the subject land. 49 The principal witness called on behalf of the plaintiff to establish that it was probable that the plaintiff could raise the necessary finance before the end of December this year was Mr Williams, a principal of Chifley Exchange Pty Limited. According to Mr Williams it would be necessary to arrange finance in the sum of approximately $7,000,000 to enable the land to be purchased at a cost of $2,000,000 and the development of 145 storage units carried out according to the development application plans. According to Mr Williams he, on behalf of his company, was confident that he could find investors who would contribute $2.5 million to the project to be used largely for the purpose of financing the purchase of the land in respect of which they would hold a second mortgage in due course. 50 It was also necessary according to Mr Williams, to obtain from the Commonwealth Bank (or another financier) a loan of an additional $4.5 million on the security of the land, which it was agreed was worth $2 million, and the development application. Mr Williams said that he had been in touch with a Mr Dean, a manager of the Commonwealth Bank of Australia in relation to an application for such finance but that he had not furnished Mr Dean with any documents relating to the proposed loan application, although he had an appointment to see Mr Dean in the afternoon of the day on which he gave evidence in the morning, namely in the afternoon of 27 November 2000. Mr Williams was optimistic that Mr Dean would within ten working days, approve the application for the loan of $4.5 million, conditional upon getting satisfactory valuations for the land and for the project, including presumably, a valuation as to the likely selling price of each of the 145 storage units. 51 There was some suggestion that Mr Williams might be recalled the following day to give evidence as to his conversation with Mr Dean, but in the event Mr Williams was not recalled and there is no evidence as to Mr Dean's attitude to the application or proposed application for finance of $4.5 million. In this connection, at the end of the day, the only evidence as to the likely selling price of the storage units is the evidence of Mr Williams who stated that he rang certain estate agents and they told him on the telephone of their opinion as to the likely selling price of these storage units, but this was presumably done without them having seen the plans lodged with the development application, and certainly whatever they said could not be regarded as a formal valuation. No such formal valuation was tendered in evidence although a two line valuation from a valuer was tendered in evidence by consent valuing the land at $2 million. 52 Mr Williams also gave evidence that, owing to the financial position of Mr Ross and the plaintiff, it was in his view likely that Mr Dean of the Commonwealth Bank would decline the application for finance unless it was supported in some way by a party of some financial substance. It was suggested that a Mr Stephan might be such a party and there was some evidence to suggest that Mr Stephan and his wife and his company had combined assets of about $500,000, but Mr Stephan was overseas although a fax statement signed by Mr Stephan was admitted into evidence after the hearing had concluded. The defendant waived its right to cross-examine Mr Stephan. 53 As to this statement, suffice as to say that, in my opinion, it does not contain any new information which has caused me to alter my views. In particular, I note that it still refers to an application to be made to the Commonwealth Bank for finance in an amount of $4-4.5 million, presumably still on the security of the land which has been valued at $2 million, although if Mr Stephan and his wife and company either realise their assets or are prepared to mortgage them, the security available for the bank might increase by half a million dollars, being their combined assets. This, in my opinion would not be sufficient to make it probable that the bank would approve the required loan of $4 - 4.5 million on a total security of what would then be approximately $2.5 million. 54 In all the circumstances, the evidence does not satisfy me that it is probable that the Commonwealth Bank would approve finance of $4.5 million with the only security being the land worth $2 million and the benefit of a development application even with the assistance of Mr Stephan. Nor am I satisfied on the balance of probabilities that any other financier would make such a loan and this notwithstanding Mr Williams evidence to the effect that if the Commonwealth Bank would not grant the loan application, he could or might be able to find other investors who would do so, because the project, in his opinion was so good. 55 I note generally that there is no building contract in existence, there are no building plans in existence, that there are no formal valuations of the project in existence, and further that Mr Ross has been unsuccessful in various applications made to various financial institutions including Westpac Banking Corporation and the National Australia Bank, among others. 56 It follows, in my opinion, that the plaintiff would not be entitled to relief against forfeiture even if there was a legally enforceable option in existence and/or the defendant was estopped from denying such, by reason of the fact that, in my opinion, the evidence does not establish that it is probable that if relief against forfeiture was granted, the plaintiff would be in a position to obtain finance sufficient to enable it to exercise the option and/or enter into a contract for sale of the subject land. It also follows that I am of the opinion that the plaintiff's claim for relief against forfeiture of the subject lease should be dismissed even on the assumption that a legally enforceable option was in existence. THE ALLEGED REPRESENTATIONS 57 So far as concerns the representations alleged to have been made by Mr Sandvoss to Mr Ross as set out in the statement of claim, I am of the opinion that the making of those representations did not involve Mr Sandvoss or Chantal Holdings Pty Limited guilty of any misleading conduct. I am further of the opinion that, in any event, Mr Ross did not rely upon those representations in entering into the lease which was entered into between the parties. In these circumstances, I dismiss the plaintiff's claim for relief under the Trade Practices Act and/or the Fair Trading Act. 58 The representations alleged to have been made by Mr Sandvoss to Mr Ross as set out in paragraph 4 of the statement of claim filed 16 November 2000 are as follows:- "4. In the course of those discussions, Mr Sandvoss represented (the representations) to Mr Ross that:- (a) The plaintiff might acquire the property by entering into an option to purchase the property by entering into a lease of the property from the defendant with an option to purchase the property. (b) To allow more time to organize the finances, the defendant would be prepared to 'leave in' an amount of $400,000 which could be repaid later. (c) To secure the transaction Mr Ross could give to Mr Sandvoss a bill of sale over a motor boat then owned by Mr Ross. (d) If the plaintiff paid the outgoings between October 1999 and January 2000 the plaintiff would not have to pay rent for the property provided the plaintiff proceeded with the purchase. " 59 So far as concerns representation (a) it is plain that what was said by Mr Sandvoss was in accordance with what was later agreed between the parties and so did not involve any misleading conduct nor did it become misleading simply because the parties failed to direct their minds to agreeing on the terms upon which the option would be granted. Moreover as the lease entered into accorded completely with this representation by Mr Sandvoss it is plain that Mr Ross did not rely upon Mr Sandvoss' representation but rather upon the terms of the lease itself which he went through carefully with Mr Sandvoss prior to execution. 60 So far as concerns representation (b) no submissions were addressed to the court on behalf of the plaintiff. 61 So far as concerns representations (c) and (d), the position is that these representations were embodied in the lease between the parties and the making of them did not involve the defendant in any misleading conduct. It is also plain in my opinion that the plaintiff did not rely upon these representations in entering into the lease but rather relied upon the terms of the lease itself, which as stated above, he went through together with Mr Sandvoss immediately prior to its being executed by the parties. MISCELLANEOUS 62 Should it become relevant I record my view that the provisions of the lease do not require the security, once utilized, to be replaced. 63 I also record that, in my opinion, there is no relevance in any connection of the doctrine of part performance which can only apply where there has in fact been agreement between the parties but one of the parties alleges that that agreement is unenforceable by reason of the absence of the writing required by law. In the present case, there being, in my opinion, no evidence that the parties had agreed upon the terms of the option agreement as contained in the draft there is no room for the operation of the doctrine of part performance. 64 I also record that I have considered the authorities referred to me by both parties and do not consider that they require me to come to any different conclusion or take any different approach in relation to the facts of the present case.

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Judgment (9 paragraphs)

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