Nichols Global Enterprises Pty Ltd v Biviano [2000] NSWSC 956 | Case summary

9 However, in a last attempt to resolve the matter before the defendants referred determination of the rental to a valuer, a four point offer was made in the letter of 5 August 1997. The letter concluded that if there was no acceptance of the offer by 5 pm the next day the defendants would proceed to instruct the President to appoint a valuer. 10 It seems from the evidence of the first defendant that there was a conversation between herself and Mr Nichols, who is the controlling director of the plaintiff. Following that conversation, on 12 August 1997 the plaintiff's solicitor, Mr Rhodes, sent a letter noting that he was instructed that the parties had agreed on six points. The six points were not identical to the four points in the letter of 5 August 1997 but one can see how development took place. 11 The letter of 12 August 1997 indicated that the new lease was to be pursuant to the Retail Leases act 1994 for a four year term with a four year option and ended by saying, "We should be pleased to receive draft lease forthwith". 12 What happened after that is rather obscure. Mrs Biviano gave evidence in the witness box that she asked her solicitor, Mr Martin, to prepare a new lease, that he did so and sent a copy to Mr Rhodes in late August, which was acknowledged by Mr Rhodes on 2 September 1997. 13 This is hard to believe because nowhere is there any evidence in any of the documents in this case that such a draft was sent or that it was acknowledged by Mr Rhodes. Furthermore, after that evidence was given by Mrs Biviano in the witness box, there was no attempt to supplement the evidence in any way by tendering any of those pieces of paper which, if they existed, must have been in the possession of the defendants' lawyers. I can, accordingly, only reach the conclusion that that piece of evidence is completely false. 14 The next piece of evidence is that there was a letter from the plaintiff's solicitor to the defendants' solicitor which is rather odd. First, it is dated 8 October 1998, 13 months after the offer. Secondly, it does not refer to any new lease being provided or not provided, but merely says that the plaintiff relies upon its exercise of the option and will be requesting the President to appoint a qualified valuer. 15 There was then correspondence between the solicitors. On 23 October 1998 Mr Martin wrote saying that his clients were considering whether they should rely on part performance or whether they were prepared to let the plaintiff rely on its earlier purported exercise of the option. 16 On 16 November 1998 Mr Martin wrote and confirmed that the defendants had agreed to allow the plaintiff to rely on its purported exercise of the option and would not seek to enforce the provisions of the new lease but asked whether Mr Rhodes had at that stage made a formal request for a valuer to be appointed. Mr Rhodes replied on 17 November 1998 that because there had been no agreement he had requested the President to appoint a valuer. 17 One point that did arise in argument, in fact it was raised in Ms Frizell's submissions for the defendants (for what appears to be the first time), was that cl 22.2 of the lease required the request to the President to be made "promptly". The word "promptly" is a word of somewhat elastic meaning and must always be considered in all the circumstances of the case. 18 The general flavour of the word "promptly" is that in all the circumstances the thing required to be done is to be done with a little more expedition than a reasonable time. In Metropolitan Land Co v Manning 71 SW 696, 699 (Kansas CA) (1903), the Court made the sound point that as it was not necessary to include any adverb if something was to be done in a reasonable time, the addition of "promptly" usually means that the thing is to be done more expeditiously. See also Brewer v Lepman 106 SW 1107, 1108 (Kansas CA) (1908) and Steelman v Curtiss 36 SW (2d) 312-313 (Texas Civil Appeals) (1931). 19 It will be noted that there was a gap of something like 14 or 15 months between the time when the original lease came to an end and the time the request for the valuation was made. Was the request made promptly? 20 There was little evidence on this point as until counsel's closing address it was never thrown into the ring as a point that needed to be dealt with. However, in the circumstances of this case the parties were continuing to "negotiate" in the loose sense of that word. On any version they were in communication about what was to be the future of the holding. The plaintiff was still in possession, it was paying rent. The defendants say that the rent was attributable to the new lease. The plaintiff says that it was a payment made in good faith pending the determination by the valuer. Whatever it was, it was a payment made by parties who were in continuous communication. 21 In February 1998, a loan of $40,000 was made by the defendants to the plaintiff to pay a fee for obtaining a nightclub licence. When this money was paid, Mr Nichols, on behalf of the plaintiff, signed a faxed copy of two pages of a draft lease noting that he signed "for clause 28 loan for a nightclub licence fee", which to my mind shows that he was not adopting any of the rest of the document. 22 The conditions of repayment of that loan showed that $19,500 was to be paid in 1998, $10,000 in 1999 and $10,000 on 31 December 2000. Neither then nor at any other stage, including in the solicitors' letters of October and November 1998, was there any suggestion that more than a reasonable time had gone by or that it was not open to anybody to approach the valuer. 23 In my view, on the facts notice was given in all the circumstances "promptly". However, even if it was not then it would seem to me on the true construction of cl 22.2 the mere fact the notice was not given promptly does not destroy the ability of the nominee of the President to fix the rent. All that a non-prompt notice would do is make the tardy party liable for damages as on breach of warranty. 24 If any other construction were adopted one would have parties held to have intended that the time for giving the notice to the nominee was virtually of the essence. This is not a construction one usually adopts with rent review cases. Moreover, to adopt it would have the effect of saying the parties intended that if there was a delay in giving the notice the whole of their negotiations, which almost by definition must have been going on for a considerable number of months, would come to nothing. Further, the plaintiff must be held to be holding over under the old lease at a much lesser rent than both of the parties were negotiating to be paid under the new lease. 25 All this shows that even if I am wrong in my construction of the word "promptly" and in my application of that word in the circumstances of this case, it would not disqualify the plaintiff's case if the request was made when it was made in October or November 1998. 26 I now return to the question as to whether there was an agreement for a new lease. It seems fairly clear that on 12 August 1997 the parties had reached a consensus on the vital terms of the new lease. However, as the cases show, that is not sufficient. There can be at least four situations where the parties have reached such a consensus:

(d) where there is provisional agreement to bind them until such time as it is replaced by a formal agreement which may have the same terms or may by agreement have additional terms. 27 Ms Frizell says that the present situation falls into the first category. She says one gets to this result by looking at the circumstances in which the letter of 12 August 1997 was written, the terms of the agreement itself and the conduct of the parties after August 1997. One can look at the subsequent conduct of the parties for certain purposes. One cannot use such conduct, as a general rule anyhow, to construe the actual contract, but it is quite competent for courts to look at subsequent conduct to see whether the parties have made a contract at all and to see what were the vital terms of it; see B Seppelt & Son Ltd v The Commissioner for Main Roads (1975) 1 BPR 9147 and Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251. 28 Mr Harris for the plaintiff, says that the circumstances show the lease was not to come into effect until there had been an exchange of counterparts, each of which was to be duly signed. 29 The task of the Court is to work out what the parties intended. Did they intend to make a contract? 30 There have been a large number of cases in this area over the years and whilst each case must depend on its own facts, the courts have worked out guidelines to assist them in deciding these sorts of questions. One guideline is that where one has a contract for sale or one has a lease of some duration the Court ordinarily expects that the parties will wish to proceed formally and be involved with a contract that only comes into existence when there has been a formal exchange of counterparts. 31 There are a number of authorities for that proposition. The basic ones are Blackburn Developments No 19 Pty Ltd v Downs Surgical (Aust) Pty Ltd (1974) 2 BPR 9141 and Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) NSW Conv R 55-027. 32 To my mind this thought is reinforced by the circumstances of this case. First, a lease for four years with a four year option was to be provided. Such a lease is required to be registered to have validity and it could only be registered if the parties were to execute a memorandum in the standard form. 33 It is almost unthinkable that a businessman such as Mr Nichols would wish to conduct a business without having a registered lease because, as his affidavit points out, this is a valuable part of the business. Secondly, the lease was to be a lease under the Retail Leases Act 1994. That Act requires various disclosure statements to be made and that leases contain certain matters or alternatively are deemed to contain them. The whole flavour of the Act is that there should be a written lease. Thirdly, the letter of 12 August 1997 itself indicates that the lessee's solicitor was expecting to receive a lease. The evidence that Mrs Biviano gave that she knew that Mr Martin had sent Mr Rhodes a lease and he had acknowledged it, shows that that was what she too was expecting. 34 In my view the circumstances show that there was to be no contract until there had been a formal exchange of the lease, which never happened. Accordingly, in my view there was no agreement for a new lease. 35 There was quite a bit of cross-examination of Mr Nichols on the circumstances of the payments that he made to the defendants after the expiry of the old lease. I thought these were probably put forward as evidence of part performance but they fell short of that. They were then used to indicate conduct which showed that it was more likely the parties had intended that the lease should operate from 12 August 1997 when there was a consensus. I have already taken them into account on that matter and consider that they are not as significant as some other factors. 36 Ms Frizell asked me not to accept Mr Nichols' evidence that the payments were made in good faith pending the resolution of the "negotiations". I cannot see any reason why I should not accept that evidence. The parties were in occupation and negotiating about their final position, perhaps on two levels, one by the solicitors, and the other with the clients themselves. This is an equally available explanation for the payments as all the others. 37 I should say that I was not at all impressed with the way Mrs Biviano kept saying that the solicitors had just misunderstood her instructions, that the letters which they had written to the plaintiff or its solicitor were not within her instructions or that the solicitors were confused. Mrs Biviano said that this applied not only to the first solicitor Mr Martin, but also to the current solicitor Mr Serio. 38 What Mrs Biviano said is quite contrary to the documents. Even if she did not see the correspondence earlier, she would have seen it in connection with the preparation of this case and for an explanation to be given of that nature in the witness box just today again affects her credibility. 39 It is conceded in the correspondence, and Ms Frizell again acknowledged in her submissions, that apart from the matter of "promptly" and apart from the matter of the new lease, the plaintiff was otherwise entitled to succeed in enforcing the exercise of the option and it would seem to me that that is a proper concession on the material that has been disputed between the parties over the years. 40 Before dealing with the remaining matters there is one thing I have omitted to say. It is clear that when there is an agreement for a new lease the lessor is bound to send a draft of the proposed lease to the lessee; see for instance the judgment of Meagher JA in Heckenberg v Delaforce [2000] NSWCA 137 at para 84. It is just unexplained why such a lease was not granted and a draft lease was not sent. Whether it be that Mrs Biviano's evidence is correct and in fact Mr Martin had sent the lease and all the correspondence has been lost, or as Mr Harris suggests, that it was deliberately held back, we do not know. But if there is an obligation to send a lease, as I hold there is, then the fact it was not sent would in itself mean that there is such an agreement and the cross-claim could not succeed. However, as I have already indicated it does not succeed on the facts generally. 41 The balance of the cross-claim then contains three elements: (a) a claim in estoppel; (b) a claim that rent has not been paid; and (c) that moneys are due under the agreement for loan that was entered into on 28 February 1998. 42 As to (a), the Court has often said that it is extremely difficult to succeed on estoppel in a case that is primarily presented as one of contract or no contract; see Milchas Investments Pty Ltd v Larkin (1989) NSW Conv R 55-487. 43 In the instant case I cannot see on the facts that there was a common assumption that each party was bound by the agreement that was set out in the letter of 12 August 1997. In particular, the fact that Mr Nichols only executed cl 28 of the draft lease would seem to suggest that there was no agreement in effect, otherwise why would he do it? 44 As to (b), if there was no agreement as alleged and no estoppel then the rent is not due as alleged in the cross-claim. 45 As to (c), the agreement of 23 February 1998 shows that only $10,000 is left to be repaid under the loan agreement and that is repayable on 31 December 2000. The time has not yet arrived, accordingly it is premature to sue for it. All this leads to the conclusion that the cross-claim must be dismissed. 46 The only outstanding issue is the claim for $10,000 damages. I use $10,000 as a round figure, the quantum of the claim can be left until later. The evidence suggests that it is a maximum of $9,641, being the amount paid for a security service after the threat was made in correspondence from the defendants' solicitors that they might take action for possession if the plaintiff did not pay as they demanded. 47 Mr Nichols gave evidence which I accept, that he took that threat seriously and he took it as a threat that possession might be taken physically, as he was aware that the defendants locked out their previous tenants. This was not contradicted. 48 Two questions arise: (a) whether damages of this nature are an appropriate thing to be awarded in addition to specific performance; and (b) whether a tenant who is threatened with dispossession can reasonably hire a security guard to protect itself against any action of repossession by direct action? 49 I am a little doubtful on the first point and I do not know of any authority which really assists. Certainly the usual case of damages in addition to specific performance is a case where the property has deteriorated in value between the contract and conveyance. However, in view of the Court's duty under s 63 of the Supreme Court Act 1970 to deal with all claims between the parties arising out of the one set of circumstances at the one time, I cannot see why the Court cannot deal with this sort of claim in a specific performance suit. Indeed to do so is consistent with Wright v Carter (1923) 23 SR (NSW) 555, 568 and cases there cited, where, even before 1972 the Court could give damages for breaches arising out of the one transaction as that over which specific performance was claimed. 50 The claim is really one for diminution of the value of the lease because of the breach of the covenant for quiet enjoyment before specific performance is actually granted, and in that sense it does come with the same purview as the topical case to which I have already referred. 51 So far as whether it is reasonable to have a security guard, this matter is a question of quantum. The authorities say that at this stage, all the plaintiff has to do is prove there is some damage and that it should then be left to the Master or alternatively the Judge in the subsequent hearing to work out the quantum. 52 This should particularly apply in the instant case as the evidence as to quantum was put on at the eleventh hour and it is only fair that the defendants have some time to meet it. 53 It seems to me that in the circumstances the plaintiff is entitled to some damages for protecting itself against possible re-entry. Whether what it did do is more than it should have done can be left to the Master or to another day. 54 It thus follows that I should make orders 1, 2, 3 and 4 in the amended summons. I should also declare that the plaintiff is entitled to some damages in respect of protecting itself from eviction by the defendants between 12 October and 2 November 1999. I should reserve further consideration generally. I should dismiss the cross-claim. Order the defendants to pay the plaintiff's costs to date. The exhibits should remain for the time being. 55 In reserving further consideration I will formally stand the matter over to my list for mention at 9.30 am on 8 May 2001, but I would expect the parties or one of them to approach my Associate to have the matter re-listed earlier, which can be done by letter, with a copy sent to the other side, on five days' notice.

Nichols Global Enterprises Pty Ltd v Biviano

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Judgment (17 paragraphs)

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Cases Cited (1)