Judgment
1The Plaintiff, OXS Pty Ltd ("OXS"), is the lessee of premises at 135 George Street, in The Rocks ("Premises") and is currently holding over in the Premises following the expiry of its lease pending the determination of these proceedings. OXS operates an Italian restaurant business trading under the name "Appetito" at the Premises. The First Defendant, Sydney Harbour Foreshore Authority ("SHFA"), is a statutory corporation constituted by the Sydney Harbour Foreshore Authority Act 1988 (NSW) ("SHFA Act") and is the owner and lessor of the Premises. The Second Defendant is the Minister for Planning and Environment and has ministerial responsibility for the operation of SHFA. The Hon. Mr Anthony Kelly was the relevant minister from December 2009 to March 2011 and The Hon. Mr Brad Hazzard was the minister from April 2011 to April 2014, the periods in issue in the proceedings.
2By Summons filed on 21 February 2014, OXS initially sought a declaration that there is a binding and enforceable agreement for lease between it and SHFA in respect of the Premises, on the terms of a memorandum of lease between the parties which commenced on 1 July 2009 ("2009 lease") with amendments such that, inter alia, the period of the lease is 10 years from 1 July 2011; the terminating date is 30 June 2021; the rent is the prevailing market rent for the premises on 1 July 2011 adjusted for consumer price index ("CPI") reviews and market rent reviews at specified intervals; and the guaranteed sum is 3 months of the rent at the commencement. As will emerge below, OXS ultimately seeks relief in the proceedings in somewhat different terms. Alternatively, OXS sought a declaration that SHFA is estopped from denying that there is a binding and enforceable agreement for lease on the same terms. OXS also brings claims under the Australian Consumer Law and the Retail Leases Act 1994 (NSW) for, inter alia, misleading or deceptive conduct, against SHFA.
3Pursuant to directions made by Rothman J on 25 March 2014, the question of liability has been separated from that of quantification of damages and this hearing is only directed to the former question, and to identification of the basis or heads of any damage that might have been suffered by OXS.
Chronology of events
4I should now set out a chronology of events, indicating findings as to several disputed events.
5Prior to late 1996, the Premises were leased by the Sydney Cove Redevelopment Authority (the predecessor to SHFA) to Ms Maya Ammann (Noble 29.4.14 [12]). OXS took over the restaurant in December 1996 and took an assignment of the earlier lease (Kazal 24.3.14) [7]; Ex P2 tab 2). A Deed dated 4 December 1996 between the Sydney Cove Redevelopment Authority, Ms Ammann, OXS and Messrs Karl and Tarek Kazal provided for the transfer of all the estate and interest of Ms Ammann (as lessee) to OXS (Ex D16, tab 5). Clause 8 of the Deed provided:
"The Lessor [Sydney Cove Redevelopment Authority] agrees to grant a licence of the courtyard at the Assignee [OXS] commencing on the day after the Transfer Date in the form of the licence, a copy of which draft is annexed to this Deed as Annexure "C" ("Licence")."
6A Variation of Lease dated 4 December 1996 between the Sydney Cove Redevelopment Authority and OXS provided for an extension of the term of the lease to 5 years and 6 months which would expire on 30 September 1997 (Ex P2, tab 2, 80). By cl 2 of a Deed of Licence dated 4 December 1996 between OXS and Sydney Cove Redevelopment Authority, OXS was also granted a licence to use the courtyard adjoining the restaurant (Ex P2, tab 2, 85). The permitted use was specified to be:
"The Permitted Use of the Licensed Space will be as a courtyard forming part of the Restaurant, for the consumption, but not the preparation, of food and liquor to patrons of the Restaurant." (Kazal 24.3.14) [7]; Ex P2, tab 2, 85-93).
7The Premises were damaged following a fire in the kitchen of the restaurant in July 1997. OXS surrendered its lease of the Premises to allow the Authority to conduct repairs to the Premises on terms that it would be granted a new 10 year lease with a 5 year option, conditional on it conducting all the works necessary to refit out the Premises for use as a restaurant and bar (Kazal 24.3.14 [8]). On 14 April 1998, the Sydney Cove Redevelopment Authority, OXS, and Messrs Karl Kazal and Tarek Kazal entered into an Agreement for Lease in relation to the Premises (Ex P3) which made provision for a new lease to be entered into following completion of the Authority's structural work and OXS's refurbishment works. A proposed form of Lease was Annexure "A" to the Agreement for Lease. OXS undertook refurbishment works in 1999, pursuant to that Agreement for Lease. OXS points to the amount spent on refurbishments, but that seems to me to be of limited significance in respect of events some 15 years later, and where those amounts were plainly spent on the basis of a lease arrangement with a fixed term.
8On 15 November 1999 (Ex P2, tab 4, 104), SHFA approved a development application for a retractable awning at the rear of the restaurant, on terms that contemplated outdoor seating for a maximum of four outdoor tables within the courtyard area. By letter dated 22 December 2009, SHFA provide a copy of that letter to OXS. OXS characterised that letter, in submissions, as a consent granted by SHFA in 2009, and relied on the fact that there was no specification as to the size of the tables or the number of chairs permitted in the area. It is by no means clear that a condition to a consent in 1999 for an awning amounts to separate approval for the outdoor seating, and the provision of a copy of that letter in 2009 was plainly not an act of consent in 2009.
9On 4 February 2001, SHFA and OXS entered into a lease for the Premises which provided for a commencement date of 1 July 1999, a terminating date of 30 June 2009 and a 5 year option to renew (Ex P2, tab 3). The lease provided for alternating CPI and market rent reviews each year (Items 10A and 10B) and also made provision for turnover rent (Item 9B).
10In May 2006, the Independent Commission against Corruption issued guidelines ("ICAC Guidelines") for managing risks in direct negotiations which would apply, inter alia, to direct negotiations between SHFA and lessees (Ex D16, tab 10). SHFA's board approved a Lease Expiry Policy (Ex D5) in June 2008 which emphasised that there was no automatic right for any existing tenant to have their lease renewed; identified several criteria which SHFA may consider in determining whether an existing tenant is to be offered a new lease and noting that nothing in the policy fitted SHFA in the assessment and application of its statutory "declarations". The policy also provided that:
"For retail leases, [SHFA] will not consider a lease renewal any earlier than 12 months before the existing lease expiry date, or as stipulated by the NSW Retail Leases Act."
The dealings in respect of the Premises in 2011 to which I will refer below were over three years prior to the expiry of the lease term in 2014.
11SHFA then adopted The Rocks Lease Renegotiation Policy on 9 June 2009 (Ex P11) which had effect until 30 September 2010 and had therefore expired prior to the events primarily in issue in these proceedings. That policy set out certain principles for direct negotiation with tenants for renewal of a lease and provided for SHFA to solicit proposals from approved existing tenants to obtain long-term leases, but emphasised that SHFA retained an absolute discretion in determining whether it renegotiated a lease with an existing lease, and that it set out only "indicative guidelines" in respect of that matter. In June 2009, SHFA invited existing tenants to express interest in participating in the process (Garrick 6.5.14 [14]). In late June 2009, OXS applied to SHFA to extend the term of its lease (Noble 29.4.14 [24], Ex D16, tab 49).
12In 2009, OXS exercised its option to renew its existing lease and, on 4 March 2010, SHFA and OXS entered into a new lease for the Premises ("2009 lease"). (Ex P2, tab 1). The 2009 lease provided for a commencement date of 1 July 2009 and a terminating date of 30 June 2014 and provided for alternating CPI and market rent reviews each year (Items 10A and 10B) and also made provision for turnover rent (Item 9B). The term "Turnover Rent" was defined in clause 1.1 of the lease memorandum (Ex P2, tab 1, 20) adopted in the 2009 lease as "the annual rent calculated as a percentage of the Lessee's Turnover if any stated in Item 9B paid in accordance with the Lease less the Rent (if any) referred to in Item 9A..." The term "Lessee's Turnover" was defined as including:
"(a) all sales of goods ... in, at or from the Premises and including ... all sales, services and hirings:
(i) the orders for which originate at or are received or accepted or recorded by the Lessee in the Premises but delivery or performance thereof is made from or at any place other than the Premises or vice versa."
13OXS submitted that, if a restaurant patron dining in the courtyard adjoining the Premises ordered food or drink from the "Appetito" restaurant, the revenue generated by that order would comprise part of the "Lessee's Turnover" under the 2009 Lease and, hence, it would form part of the calculation of "Turnover Rent". The evidence of Mr Karl Kazal, a director of OXS, was that no distinction was made by OXS between sales from the indoor and outdoor areas of the restaurant at the Premises (T78). Mr Kazal's evidence was that:
"The turnover (sales) from the restaurant business at 135 George Street increased steadily in every year from 2001 to 2008. Although there was a small reduction in turnover in 2009 and 2010 as a result of the global financial crisis, by 2011, the turnover had increased again and it increased again in 2012." (Kazal 25.6.2014 [4])
Mr Kazal also gave evidence of specific turnover figures for the restaurant that he said were for serving patrons both inside the restaurant and in the outside area. Both Mr Kazal's evidence as to the trend in the turnover of the restaurant and his evidence as to the specific turnover figures were starkly inconsistent with the record of turnover rent paid by OXS to SHFA over the relevant period. Mr Kazal abandoned the turnover figures in his evidence when confronted with that inconsistency, without offering any convincing explanation for the inconsistency between the wider trends in turnover to which he had referred and the turnover rent paid by OXS to SHFA.
14During 2010, OXS undertook substantial maintenance and upgrade works at the Premises (Kazal 24.3.14 [11]). Mr Kazal's evidence is that OXS took advice from a design and branding firm about rebranding the restaurant, the name of the restaurant was changed to "Appetito", changes were made to signage, the reception area, tables, chairs and other works undertaken and OXS also engaged a new head chef and spent about $300,000 upgrading the restaurant (Kazal 24.3.14 [11]-[14]). These works were undertaken at a time that OXS had a lease for the premises for a fixed term and prior to the events that are primarily in issue in the proceedings.
15Mr Warwick Watkins AM was appointed as Chief Executive Officer of SHFA from March 2010 and held that position until March 2011. Mr Watkins' evidence in cross-examination was that he was appointed in light of the then Minister having received complaints from tenants about their leases at The Rocks and that he was given a mandate to resolve issues within the framework of the SHFA Act and with regard to the commerciality of SHFA as a corporation (T84). Ms Egle Garrick, who held senior positions at SHFA at the relevant time, accepted in cross-examination that Mr Watkins was a "commercially-driven" chief executive officer who did not want to lose tenants and have vacancies in SHFA's properties (T193, 219). Section 30 of the SHFA Act relevantly provides that:
"any act, matter or thing done in the name of, or on behalf of, [SHFA] by the Chief Executive Officer is taken to have been done by [SHFA]".
There is no dispute in these proceedings that acts taken by Mr Watkins would, if they were otherwise legally effective, bind SHFA. A significant issue in these proceedings is the nature of an "offer" made by Mr Watkins and whether it was legally effective.
16A briefing note dated 16 June 2010 to Minister Kelly in respect of lease renegotiations at The Rocks (Ex D6), which was signed by Minister Kelly, recorded that the OXS lease (amongst others) was to be reviewed by Mr Watkins for possible progression on a case by case basis. Mr Watkins' evidence in cross-examination (T 93, T 121-122) was that SHFA's Rocks Lease Renegotiation Policy (Ex P11) and its Lease Expiry Policy (Ex D5) provided flexibility to enable him to negotiate with a tenant such as OXS.
17By letter dated 7 July 2010 to OXS (Ex D7), SHFA noted that it had considered an expression of interest by OXS in renegotiating its existing lease in response to The Rocks Lease Renegotiation Policy and advised that:
"[SHFA] has carefully considered the property's potential financial and heritage value and long-term maintenance requirements, and decided not to re-negotiate [OXS's] existing lease at this time. This decision is consistent with the principles for direct negotiation outlined in the policies.
[SHFA] would however be willing to consider your client's existing lease under the Lease Expiry Policy at the appropriate time."
18On 24 August 2010, Mr Kazal wrote to Mr Watkins (Ex P2, tab 6) giving an update on the work done by OXS to rebrand and upgrade the "Appetito" restaurant and also referring to "a less than constructive attitude of [SHFA's] senior staff". Mr Kazal's evidence is that, in late 2010 or early 2011, he and Mr Charif Kazal (who did not give evidence) met with Mr Watkins and a conversation took place as follows (Kazal 24.3.14 [16]):
Kazal: "... We have spent a lot of money on rebranding and renovating the restaurant and building. We would like a long term lease to reflect our investment in the building."
Watkins: "That shouldn't be a problem, write to me and set out your request."
Mr Watkins, whose evidence was led in OXS's case, gave evidence of a conversation in somewhat different terms, which also included a request by Mr Kazal for a longer term for the lease; did not include any statement by him that that "shouldn't be a problem"; and concluded with him requesting a letter setting out the request and indicating he would "consider an extension of the term of the lease" (Watkins 21.3.2014 [32]). I did not understand OXS to place particular reliance on the initial words attributed by Mr Kazal to Mr Watkins, but not recorded in Mr Watkins' account, which were (if said) plainly qualified by the invitation to Mr Kazal do put a proposal to SHFA, which OXS then did.
19On 28 January 2011, Mr Kazal wrote to Mr Watkins outlining factors supporting OXS's request for an extension to the lease and requesting that SHFA give due consideration to the extension of the 2009 lease by 10 years with an option to renew for a further 5 years (Ex P2, tab 8).
20Mr Watkins then raised the possibility of extending OXS's lease for a further 7 years after its current lease would expire, equivalent to 10 years from 1 July 2011, with Ms Garrick and Mr Robert Noble, SHFA's Manager, Property and Leasing. Ms Garrick accepted in cross-examination that such a conversation took place (T210) and Mr Noble did not deny Mr Watkins's evidence as to this matter (T241). Ms Garrick's evidence is that she opposed the course proposed by Mr Watkins and her evidence is that, prior to the receipt of advice from SHFA's external solicitors, she told him "don't do this Warwick" and she commissioned external legal advice to seek to persuade him not to proceed (T185-186). Mr Watkins decided to proceed in any event (T202).
21Mr Watkins' evidence is that Ms Garrick agreed to the proposed new lease to SHFA giving an extension of the lease by a further 7 years (Watkins 26.6.2014 [15]). Ms Garrick denies that she agreed to that suggestion (Garrick 6.5.2014 [16]) and Mr Noble, who was present at the meeting, also denies that Ms Garrick agreed to that course (Noble 29.4.2014 [34]). I prefer Ms Garrick's evidence in that regard, which is consistent with the objective probabilities given the surrounding correspondence. Mr Henskens, who appears with Mr Zahra for OXS, put to Ms Garrick in cross-examination that Mr Watkins might have understood her silence, after he had decided on the course to be taken, as acquiescence (T210-211) and she accepted that possibility. It was proper for her to do so, since that was plainly a possibility. However, it does not seem to me that possibility assists OXS. Its major difficulty is that Mr Watkins' evidence is that he "distinctly recall[s]" Ms Garrick agreeing with the course he proposed, not that he understood her silence or failure further to protest a course to which she had previously objected as approval of that course. Its second difficulty is that it is perhaps more likely that a chief executive would understand a subordinate's not reagitating matters that the chief executive had determined over the subordinate's objection as reflecting the subordinate's recognition that it would not be constructive to do so, rather than as agreement with the course taken over his or her objection.
22Ms Garrick's evidence in cross-examination was that she thought it was not appropriate to extend the lease to OXS without going to the market or to open tender (T174) and she accepted that an open tender would mean that the Premises would go to market through advertising to the public which would take place by written or broadcast advertisements (T178). OXS in turn submitted that the course preferred by Ms Garrick:
"... would have seen a longstanding and successful tenant in OXS, who was paying market rent and who wanted to make another long term commitment to the Premises, being removed only for SHFA to then start an uncertain process of searching for a new tenant - all at a time when SHFA already had a number of vacant properties. The lack of commerciality is breath-taking."
OXS contrasted that approach with what was said to be the "commendable", "entirely reasonable" and "commercial" approach of Mr Watkins in seeking to:
"placate an eager existing tenant, resolve an outstanding licence issue and secure a further lease for SHFA on commercial terms and the prevailing market rate."
It seems to me that the question whether the course then preferred by Mr Watkins on the one hand or Ms Garrick and now SHFA on the other was or is commendable, reasonable or commercially prudent is not in issue in the proceedings, and would in any event depend on an assessment of the relative weight to be given to matters such as to appropriate leasing process by public authorities, the interests of OXS and the risk of economic loss to SHFA, as to which minds might well differ.
23OXS also contended that the type of advertising and tendering practices that Ms Garrick preferred could only be undertaken if OXS consented, vacated the premises or SHFA made clear to OXS that the current lease was to come to an end and/or would not be renewed under s 44A of the Retail Leases Act. OXS submitted that:
"In the circumstances of this case where OXS was actively seeking to stay in the Premises for a new lease term, the only way in which SHFA could go to market or an open tender, as Ms Garrick proposed, was to undertake the process of getting OXS out of the Premises."
However, as OXS fairly recognised in submissions, that course could be adopted after SHFA gave the requisite notice under s 44A of the Retail Leases Act, as it ultimately did in December 2013.
24At about the time that Mr Watkins was considering offering OXS a new lease in early 2011, Ms Garrick and Mr Noble sought legal advice from OXS's external solicitors. On 15 February 2011, at 9:16am, Ms Garrick sent Mr Watkins an email referring to dealings in respect of the Premises as follows:
"Kazal letters are in preparation. I have sought extensive legal and probity advice on their requests, and the news will not be what they were hoping for.
Their request re 135 George Street is completely outside our lease expiry policy (as they would well know). This property is controversial, as it has never gone to open market in an EOI [expression of interest]. It was one of the properties referred to (for this reason) in the SMH article. The letter will outline the requirements to proceed within due process." (Ex D4)
25On 15 February 2011, the external solicitors to SHFA provided written advice to SHFA recommending against the grant of a new lease to OXS and recommending that SHFA allow that lease to expire and then test the market (Ex D16, tab 52). In particular, that advice stated:
"As you are aware the NSW Government Procurement Guidelines and in particular the ICAC 'Guidelines for Managing Risks in Direct Negotiations' (Guidelines) confirm that direct negotiations, as a general rule, should be avoided. Whilst there are certain exceptions, the circumstances relating to the Appetito Premises do not fall within the usual exceptions to the prohibition against direct negotiations.
In relation to the Appetito Premises:
● the tenant has no legal right to direct negotiation,
● the value of the contract is substantial, and
● it is likely that a competitive process would provide an advantageous result for SHFA.
In those circumstances there is nothing in the Guidelines that would encourage or compel SHFA to enter into direct negotiations in relation to the Appetito Premises.
If the premises were put to a public competitive tender process, and the current tenant was unsuccessful, there are certain guidelines which may enable SHFA to provide some compensation to the tenant relating to a fair value for the fixed improvements provided by them in the premises. Nevertheless, it may be that by the end of the lease term, the premises would be in need of refurbishment or updating of the improvements in any event."
26Mr Noble's evidence was that he briefed Mr Watkins and Ms Garrick with that advice and provided Mr Watkins with a copy of the advice and then briefed SHFA's board (comprised of Mr Watkins and Mr Haddad) on the same day (Noble 29.4.2014 [30]-[33]). Mr Watkins disputed that account (Watkins 26.6.2014 [8]) but accepted that he was at least advised of the substance of that advice.
27Mr Watkins' evidence was that, following receipt of the letter from OXS, he met with Minister Kelly. Mr Watkins does not date that meeting in his affidavit, other than to say it was after OXS's letter dated 28 January 2011. The Plaintiffs' chronology treats it as having occurred between that date and 23 February 2011, the date of a letter from Mr Watkins to OXS to which I refer below. Mr Watkins' evidence was that, during the meeting, he and Minister Kelly had a discussion about a number of issues in which Mr Watkins told the Minister that he had met with representatives of OXS and discussed issues of concern in relation to the Premises, and a conversation took place (Watkins 21.3.14 [36]) as follows:
Watkins: "I also discussed the issues with the executives of SHFA and believe the outstanding matters can be resolved by the offer of a new 10 year lease on commercial terms and subject to resolution of some matters of concern to SHFA. That will give OXS 7 years from the end of its current lease."
Kelly: "Yes, proceed."
I will address that conversation further in paragraphs 72-74 below.
28Mr Watkins's evidence was that he told Ms Garrick about his meeting with Minister Kelly and the substance of what he had discussed with the Minister. Ms Garrick's evidence in cross-examination was that such a conversation "may have happened, I don't know" and "Well, I don't remember, so I can't deny or agree. I just don't remember, I'm sorry" (T184-185). Where Ms Garrick does not recall that conversation, her evidence does not take the position as to the conversation with the Minister further beyond Mr Watkins' evidence.
29On 23 February 2011, Mr Watkins (whose conduct, in this respect, binds SHFA as I noted above) wrote to OXS responding to its previous request "regarding an extension of your lease" (Ex P2, tab 9) ("February 2011 letter"). That letter read as follows:
"Thank you for your letter of 28 January 2011 regarding an extension of your lease at 135 George Street, The Rocks.
Sydney Harbour Foreshore Authority is prepared to offer you a new ten year lease commencing 1 July 2011 on commercial terms at the prevailing market rate, provided that:
● A development application is lodged with the City of Sydney to formalise the outdoor seating at the rear of the premises
● An outdoor seating licence for the rear of the premises is entered into with the Authority which provides that turnover from this area will form part of the turnover of the premises
● The current lease is surrendered in favour of the new ten year lease."
If you wish to proceed with a new lease on that basis please contact the Authority's Acting Group Manager ..."
I have italicised the words "is prepared to offer" and "provided that" since they raise a question whether, on the proper construction of that letter, it was an offer of a lease open for immediate acceptance or, alternatively, an indication of SHFA's willingness to take the specified step (that is, to offer a ten year lease) in the future provided that the specified conditions had been satisfied.
30OXS responded, by letter dated 28 February 2011 (Ex P2, tab 10), accepting the conditions set out in the February 2011 letter and purporting to accept the offer made in that letter, and stating:
"[p]lease advise when the new lease will be made available for review."
31In March 2011, Mr Watkins was stood down from his position as chief Executive Officer of, inter alia, SHFA, pending an investigation into other matters unrelated to SHFA.
32After a delay of some months, OXS took limited steps toward obtaining a new development approval from Sydney City Council and an outdoor seating licence in respect of the courtyard area in the Premises from SHFA (Kazal 24.3.14 [25]-[27], Ex P2 tabs 12-13, 15), which was one of the conditions in the February 2011 letter. A meeting took place between OXS and representatives of planners engaged by OXS at the Premises on 5 May 2011 (Ex D14). After Mr Shillito, a town planner who was working on the relevant matter and gave evidence in OXS's case, was informed by a colleague of the retainer by OXS in June 2011, he requested information from OXS to progress the application and was emailed a proposed plan for the outdoor seating on 30 June 2011 and his firm was formally engaged on 14 July 2011 (Ex P2, tab 13). Mr Shillito requested further information from OXS in July 2011 and OXS did not respond. Mr Shillito ceased working on the matter when that information was not provided and rendered an invoice for work done in November 2011 (Ex P2, tab 15; Shillito 24.3.2014 [10]). Nothing further happened with the application for nearly nine months until mid-August 2012.
33In late July 2011, Ms Garrick asked Mr Noble to seek legal advice regarding Mr Watkins' dealings with Mr Kazal in relation to the Premises (Noble 29.4.14 [43]). On 28 July 2011, SHFA sent an email to its external solicitors providing them with a copy of the February 2011 letter and earlier correspondence from OXS (Ex D5) but, initially, not the letter dated 28 February 2011 from OXS purporting to accept that offer. Although OXS placed much weight on that omission, little turns on it because that letter was provided to those solicitors (Ex D15) shortly before their advice was provided. SHFA advised its solicitors:
"... As discussed we seek urgent advice as to whether in terms of SHFA Policies and Procedures in relation to lease renewals, the Retail Leases Act, ICAC guidelines on direct dealings and any subsequent probity issues that may arise from the former CEO's correspondence if the responses are soundly based.
Should you form the view that they are not soundly based we seek advice as to the strategies or actions that SHFA may take to "unwind" these arrangements.
I would further advise that at this stage no Development Applications have been submitted to SHFA for Landowners Consent however I am aware that the Kazals have undertaken some preliminary works to lodge the D[evelopment] a[pproval]s."
OXS submits that SHFA then "clearly considered that there were arrangements that were in place to unwind" and that it "can hardly be suggested that legal advice was necessary if SHFA did not consider that arrangements in the form of a concluded agreement were not in place." If SHFA's subjective understanding of this matter were relevant, I would not read the reference to "arrangements" in this email as an acceptance by SHFA that the correspondence was a legally binding arrangement. It also seems to me that, since it would have been prudent and appropriate for SHFA to seek legal advice even if its subjective understanding was that no legally binding arrangement had been reached, to confirm the correctness of that view, the fact that legal advice was sought does not indicate an understanding that a concluded agreement was in place.
34SHFA's external solicitors provided initial advice late in the afternoon of 2 August 2011. OXS submits, in effect, that those solicitors must have failed to take OXS's letter dated 28 February 2011 accepting SHFA's "offer" into account because it was only provided to them shortly before their advice was provided. I do not accept that submission. OXS's letter was not lengthy and would not have required lengthy consideration by a solicitor who had already considered the terms and significance of the February 2011 letter.
35On 3 August 2011, SHFA's solicitors provided SHFA with an updated version of their advice that did not change in any relevant respect (Ex D16, tab 57). That advice referred to "proposals" rather than to an offer and acceptance, advised that no binding agreement had been forced, stated (also correctly, on the findings that I reach below) that ministerial consent was required for a binding agreement and recommended that, if the Minister decided to withhold his consent to a new lease, SHFA advise OXS as soon as possible that:
"1. The Minister has reviewed SHFA's files for 135 George Street and Bay 43 [another property in issue];
2. The Minister has indicated that he will not consent to the proposed new leases; and
3. SHFA is unable to enter the lease is proposed for 135 George Street and Bay 43 without the Minister's consent."
OXS criticised that legal advice on the basis that it had not adequately distinguished between the position in respect of the Premises and the position in respect of another property which the Kazal Group had sought to lease, and treated both as proposals rather than treating the position in respect of the Property as a concluded agreement for lease. It does not seem to me that it is necessary for me to address that criticism, the validity of which depends on a primary issue to be determined by the Court in this hearing, namely, whether the February 2011 letter and OXS's purported acceptance of it gave rise to a binding contract. In the event, I have reached the same conclusion as that legal advice, albeit at somewhat greater length.
36On 10 August 2011, SHFA prepared a ministerial briefing note for the then Minister, Mr Hazzard (Ex P6). That note attached a copy of the legal advice obtained by SHFA but adopted a somewhat different approach from that contemplated by that advice, in that it did not ask the Minister to decide whether to withhold his consent to a lease over the Premises. It was marked "for your information" and advised that SHFA proposed to inform OXS that SHFA would withdraw its "offers" in respect of two properties, including the Premises, and stated that SHFA "will advise the Kazals accordingly." The Minister signed that briefing note and "noted" the legal advice attached to it. The Minister contends, and all parties now accept (although OXS initially contended to the contrary, and SHFA also initially adopted a qualified position) that the Minister did not then make any operative decision.
37On 23 August 2011, SHFA wrote to OXS referring to earlier correspondence including the February 2011 letter (Ex P2, tab 16; Ex P8) ("August 2011 letter") and stated that:
"Following a review of Sydney Harbour Foreshore Authority's leasing file for this property, the Minister for Planning and Infrastructure, the Hon. Brad Hazzard MP, has indicated he will not consent to the proposed new lease.
Accordingly, the Authority must now withdraw its offer and the current lease will continue until its expiry in June 2014."
That letter refers to an "offer", which must be a reference to the February 2011 letter. OXS makes somewhat strident submissions as to this letter, which it characterises as part of a "false and misleading charade that the Minister was to blame" for the withdrawal of the "offer" made in the February 2011 letter. That letter was, at best, imprecise because the Minister had not been asked to and had not reviewed SHFA's leasing file and had not been asked to and had not indicated that he would not consent to the proposed new lease. He had, however, been asked to note and had noted SHFA's intention to withdraw its "offer" of the lease.
38Mr Kazal's evidence was that (Kazal 24.3.2014 [33]):
"The development application for the outdoor seating area ceased to be a priority for OXS given SHFA's letter of 23 August 2011 and given that none of the staff at SHFA raised the issue of it with me following that letter being issued."
I do not accept that evidence, since the chronology set out in paragraph 32 above indicates that little of substance had occurred by that date which was capable of being paused. I will return to the chronology in respect of the development application, when further attention was given to it by OXS in late August 2012, below.
39By subsequent correspondence, OXS maintained that the parties had entered into a binding agreement for lease of the Premises (Kazal 24.3.14 [30]-[31], [35]; Ex P2, tabs 17-18). By letter dated 15 September 2011, OXS's solicitors wrote to SHFA relying on the February 2011 letter and its acceptance by OXS as follows:
"That offer, having been accepted by [OXS] in its reply of 28 February 2011 is not capable of being withdrawn.
Those two items of correspondence constitute an Agreement for Lease which is enforceable by [OXS] ...
Please submit the lease documents execution."
40By a further letter from Mr Kazal to SHFA dated 21 September 2011 (Kazal 24.3.14 [31], Ex P2, Tab 18), Mr Kazal stated that:
"On the basis of the letter extending our tenure for a further 10 years, we undertook further expenditure which we cannot expect to recover over the shorter lease term of our current lease. This is expenditure we would not have undertaken if we ever thought there was the prospect of us not having the tenure period that resulted from the agreement for the additional term.
We find it astounding that an agreement can be reached for a further term, we then expend significant sums on the property based on that agreement and now SHFA purports to walk away from that agreed position. The distress which this situation is causing us is immeasurable.
If the Minister requires additional information then please let us know, but the current position cannot be allowed to stand.
We require SHFA to abide by the agreement which was reached. Please submit to us a lease as required by the agreement reached."
On the evidence as it now stands, OXS had spent, at best, some part of approximately $14,000 after the date of the February 2011 letter, although it had previously spend a much more substantial amount in the order of $300,000 in 2010, before that letter had been received. This letter (particularly the reference to "SHFA purports to walk away") suggests that Mr Kazal understood that SHFA had altered its previous position by that time, and the position taken by Mr Kazal in that letter is not wholly consistent with the position that he now takes in evidence, that he understood SHFA continued to support the lease although the Minister did not.
41By letter dated 26 September 2011, emailed on 27 September 2011 (Ex P9), SHFA responded to OXS's letter dated 21 September 2011 and advised OXS that:
"As indicated in my letter of 23 August 2011 the Minister for Planning and Infrastructure, the Hon Brad Hazzard MP, will not consent to the lease arrangement proposed.
Your current lease will continue until its expiry in June 2014, and I look forward to discussing your options in the normal process prior to lease expiry."
That letter has the same imprecision as to the Minister's involvement as the earlier letter from SHFA. However, it made clear that SHFA's position was that OXS's lease would go to expiry, subject to the usual process adopted by SHFA in respect of lease expiries, and OXS could thereafter have been in no doubt as to that position.
42In mid-2012, OXS engaged a third party to approach the Minister and ascertain why ministerial consent had been withdrawn (Kazal 24.3.14 [35]). The approach to the Minister prompted a further letter dated 2 August 2012) ("August 2012 letter") (Ex P2, tab 20) from SHFA to OXS referring to that approach and reiterating SHFA's position as to two properties including the Premises. That letter stated that:
"In mid-2011, the Minister indicated that he would not consent to the proposed new lease for 135 George Street. Subsequently, the Authority withdrew its offer to negotiate a new extended lease, as ministerial consent would be mandatory.
The Authority confirmed to you in a letter from Egle Garrick dated 23 August 2011 that the existing lease would continue until is expiry in June 2014.
At present, a DA for outdoor seating at the rear of the premises in Nurses Walk has not been lodged with the City of Sydney, in spite of this space being operated daily. It is requested that you advise the Authority in writing within 14 days of how you will address this matter.
Should a DA be approved, you would then need to enter into discussions with the Authority for an outdoor seating licence.
The Authority will not enter into any negotiations for a new lease until the outstanding matter of outdoor seating has been resolved."
Mr Kazal's evidence, admitted as evidence of his understanding under s 136 of the Evidence Act 1995 (NSW), was that the August 2012 letter caused him to believe that SHFA supported a new lease. I find it difficult to see that Mr Kazal could reasonably have read that letter as indicating SHFA's support for a new lease, as distinct from concern as to the present position in respect of the development approval for outdoor seating and a requirement that that issue be resolved prior to any discussion in respect of a new lease.
43By a further letter dated 29 August 2012 from SHFA to OXS (Ex D16, Tab 40), SHFA advised as follows:
"Any new lease for the premises will be assessed in accordance with [SHFA's] lease expiry policy, which requires substantial capital expenditure on premises for extended lease terms of up to 10 years to be considered. I have enclosed the policy for your information.
As previously advised [SHFA] will not enter into any negotiations for a new lease until the outstanding matter of outdoor seating has been resolved. I understand that you will be pursuing a development application with the City of Sydney, which, pending approval, would allow you to commence discussions with [SHFA] for an outdoor seating licence. Noting that your current lease expires on 30 June 2014, I look forward to your progressing this matter."
Mr Noble's evidence is that he provided input into that letter and saw it before it was sent (Noble 29.4.14 [22(k)], [57]). That evidence is relevant to a representation which OXS alleges Mr Noble made about this time, to which I will refer below. Mr Kazal's evidence was that he read the letter but not the attached policy (T63).
44OXS submits that the process of seeking a development consent for the courtyard was recommenced in August 2012 following the August 2012 Letter. It is convenient to set out subsequent events in respect of that application here. Mr Kazal's evidence was that, in August 2012, he caused OXS to re-engage BBC Planners to prepare a development application for the outdoor seating area (Kazal 24.3.14 [37]). In mid-August 2012 Mr Shillito received a telephone call from the in-house Counsel for the Kazal Group, who requested a copy of the documentation that he held with respect to the development application on which he had done limited work in the previous year, as I noted above (Shillito 24.3.14 [11]). In late August 2012, OXS advised his firm that it wished to re-engage the firm to prepare the development application.
45By letter dated 21 August 2012, Mr Kazal wrote to SHFA referring, inter alia, to the fact that OXS had, in accordance with the February 2011 Letter and its acceptance, "attended to engaging the appropriate consultants to make the necessary application which accords with [SHFA's] requirements" and would pursue that application (Ex P2, tab 22). That statement was correct, so far as OXS had engaged (or at least was about to re-engage) the planning consultants) although it had not at that point provided the information which they requested to pursue the application or substantively progressed the application.
46Mr Shillito subsequently prepared a draft statement of environmental affects and a draft plan of the rear seating area and, by email dated 19 September 2012, Mr Shillito advised a colleague that the approach adopted by the person with whom he was dealing at OXS "seemed to be stall tactics" and noted that he had sent her the form for the development application four times (Ex D9). In late September, Mr Shillito was instructed to send the relevant information to another employee of OXS.
47Mr Shillito was advised, on 4 October 2012, that Mr Kazal had delivered the development application to SHFA (some 20 months after the reference to it in the February 2011 letter) with a request that SHFA "urgently sign the landowner's Consent and return the application urgently" (Shillito 24.3.14 [20]). SHFA gave notice of amendments that it required to the outdoor seating plan in mid-October 2012; Mr Shillito requested a survey plan of the area from OXS so that he could prepare a response to SHFA's letter and was advised at the end of October that OXS did not have a survey plan and he should proceed on the information he had. By email dated 31 October 2012 (Ex D11), Mr Shillito advised his superior of his concern about OXS's approach in this regard. The process then continued from late November 2012 and into the first half of 2013. By email dated 29 August 2013, Mr Shillito advised OXS's solicitor that the assessing officer at Sydney City Council had been to the site to undertake his inspection and noted that:
"There were almost double the amount of tables and chairs as to what was indicated on the plans and that some of the furniture was blocking the fire egress paths indicated on the plan." (Ex D13)
The signed development application was lodged with Sydney City Council on 30 May 2013 and Council issued development consent on 23 September 2013.
48A new deed of licence between SHFA and OXS in respect of the courtyard was entered into on 25 November 2013 (Ex P2, tab 44) which provided that the Licence was interdependent with OXS's occupation of the Premises; the 'Permitted Use' of the courtyard was for seating in conjunction with the licensed restaurant, Appetito and "in compliance with the Development Approval". The Development Approval (specified in Annexure "D" of the Licence as D/2013/715) (Ex P2, tab 43) in turn specified that the approved development was for:
"Use of rear courtyard for outdoor seating comprising 7 tables, 14 chairs, 4 planters and 3 heaters in association with 'Appetito' licensed restaurant."
49By letter dated 20 December 2013, SHFA, by its solicitors, wrote to OXS advising that no new lease would be provided to OXS and that the 2009 lease would expire on 30 June 2014 and OXS should vacate the Premises by that date (Ex P2, tab 45). That letter complied with the notification requirement under s 44 of the Retail Leases Act.
Whether the February 2011 letter and OXS's acceptance of it gave rise to a binding contract
50OXS's primary claim is for specific performance of an agreement for lease that it contends it entered with SHFA by accepting, on 28 February 2011, an offer for a new lease made by SHFA by the February 2011 letter. That claim depends, of course, upon OXS being able to establish that exchange of correspondence gave raise to a binding contract and that it is otherwise appropriate for the Court to order specific performance of that contract.
51The first matter raised by this claim is whether the February 2011 letter and OXS's response gave rise to an immediately binding contract. In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548, Gleeson CJ (with whom Hope and Mahoney JJA agreed) observed that the question in a case of this kind involves the intention of the parties to make a concluded bargain, which is related to but not the same as the question whether the parties have reached agreement upon such terms as are legally necessary to constitute a contract. His Honour also noted that:
"... in the ordinary case, as a matter of fact and common sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a Court will be to conclude that they had the requisite contractual intention."
The Court may have regard to the parties' communications after the formation of an allegedly binding agreement in order to determine, objectively, whether or not they intended to form such an agreement: Australian Broadcasting Corp v XIVth Commonwealth Games Ltd above at 567-548; Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 at [14,562].
52OXS submits that the agreement for lease formed by the exchange of correspondence falls within the first or fourth categories referred to in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 and Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628, affirmed in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634-635, namely, that the parties intended to be bound immediately though expressing a desire to draw up their agreement in a more formal document at a later stage; or that the parties intended to be immediately bound by the terms that they had agreed upon, whilst expecting to make a formal lease in substitution for the first agreement containing, by consent, additional terms.
53On the other hand, SHFA submits that the February 2011 letter was no more than an invitation to treat and not a contractual offer and, at most, was within the third class of case in Masters v Cameron above. The features of that class of case were summarised by Rares and Dodds-Streeton JJ in Factory 5 Pty Ltd (in liq) v State of Victoria (No 2) [2012] FCAFC 150 (at [60]) as follows:
"The courts will not lend their aid to the enforcement of an incomplete agreement because it is no more than an agreement of the parties to agree at some time in the future: Booker Industries Pty Ltd v Wilson Parking (QLD) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 604 per Gibbs CJ, Murphy and Wilson JJ. In Masters 91 CLR at 361 the Court said ...
"Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor &c. of the Poor of Kingston-upon-Hull v Petch ((1854) [1854] Eng R 995; 10 Exch 610 [156 ER 583]. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker ((1950) [1950] HCA 13; 18 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed."
54There are matters that are capable of supporting each of the competing positions. OXS points out that the term "offer" used in the February 2011 letter arguably suggests an intention to form a binding agreement, if an offer accepted. However, that term is not used in isolation but as part of the phrase "prepared to offer" and in the context of the three identified conditions. I am conscious that, as Kirby P observed in Geebung Investments Pty Ltd above at 14,570:
"It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. The same approach should be taken to the analysis of words and phrases within the correspondence. Reference to an "agreement" having been reached does not necessarily prove the existence of a presently binding contract. Conversely, references to a "proposed" agreement, and similar expressions, will not necessarily mean that no agreement presently exists. It is a question of how the words are to be interpreted in their context, and in the light of the correspondence, viewed as a whole."
That passage was quoted by approval by Santow JA (with whom Tobias JA and Young CJ in Eq agreed) in ANZ Banking Group Ltd v Ciavarella [2003] NSWCA 304 at [33], where the Court held the words "prepared to offer" had effect, in their context, as a contractual offer. Nonetheless, it seems to me that the words "prepared to offer" in the February 2011 letter, in the context of the specified conditions that are to be satisfied in the future and the lack of specificity of the terms of the proposed agreement, are to be distinguished from the word "offer" standing alone and contemplate that an offer, in the contractual sense, would be made at a future date, once the relevant conditions were complied with.
55OXS also submits that the agreement formed by the exchange of correspondence was certain as to the fundamental terms, where the parties had agreed to extend the term of the 2009 lease and had previously entered into formal leases in 1999 and 2010 (Ex P2, tabs 1 and 3) which were "virtually identical" in their terms and incorporated the same registered lease memorandum. On the other hand, SHFA submits that the statement that SHFA was "prepared to offer" a new lease "on commercial terms" should be read together as a composite expression that reinforces the uncertainty of what was being "offered". These matters are relevant to whether the February 2011 letter and OXS's response gave rise to an immediately binding contract, as well as to the question of contractual certainty that I will address below.
56As SHFA points out, no agreement had been reached between the parties as to the amount of the "prevailing market rate" referred to in the February 2011 letter and no mechanism was specified to resolve any dispute about that question by reference to an expert or any other dispute resolution procedure. The timing and nature of rent reviews had also not been agreed. Agreement had also not been reached as to the terms of any turnover rent provisions. Both parties would have understood that matter was potentially significant, where a difference had arisen in 2010 between SHFA and another company within the Kazal Group as to the threshold at which turnover rent was payable at another property (Ex D3; T73), and where the turnover rent paid by OXS in respect of the Premises had substantially declined in the later years of the 2009 lease (Ex D2, T65-66). In my view, the number of issues that had not been addressed between the parties, including matters such as any special terms of the lease; the amount of the initial rent payable or the mechanism by which it was to be determined; the turnover rent provisions and the terms of the rent review provisions is one factor suggesting that the parties did not intend the February 2011 letter to have binding effect, particularly where (as I will note below in respect of the question of certainty) the reference to "commercial terms" was not sufficiently precise to resolve those questions. I will refer to other relevant factors below.
57It also seems to me that the three conditions in the February 2011 letter also supports a reading of that letter as indicating what SHFA was "prepared" to do, that is, make an offer after those conditions were satisfied rather than being intended to have immediately binding effect. The contrary view would have the result that SHFA would be bound by an agreement for lease on the terms of that letter, unless or until a fuller document was executed, although the February 2011 letter did not in terms impose any obligation on OXS to satisfy those conditions within any specified time and, even if it had done so, would have left SHFA to a claim for damages that might be difficult or impossible to establish for any failure to do so. That result would be inconsistent with the circumstances then known to both parties, including that SHFA had expressed continuing concern as to OXS's use of the outdoor area without a then current development approval or licence for it.
Contractual certainty
58Next, there is an issue as to whether the exchange of correspondence was sufficiently certain to have contractual effect. OXS submits that
"The grant of a new lease in extension of the term of an existing lease to a tenant who had been in occupation of the Premises on essentially the same terms since as early as 1996 meant that it was unnecessary for the [February 2011 letter] and the OXS Acceptance to descend into levels of detail about esoteric terms and conditions. The parties were commercial persons who had dealt with each other in respect of the Premises on the same terms for about 15 years. SHFA acted commercially in the operation of its leasing business, and there is no evidence to suggest the existing lease was not on commercial terms. Indeed, Ms Garrick's evidence was that the standard form leases used by SHFA were on commercial terms [making reference to T168]."
59It seems to me that there are two fundamental difficulties with that submission. The first is that the premise of SHFA's case is that a proposal for a lease "on commercial terms" is an offer of a lease on the terms of the 2009 lease, as amended to commence, on its present case, in 2014. However, SHFA could readily have made an "offer" referring to a lease on the terms of the 2009 lease, except as to starting date and term, but did not do so, and OXS's purported acceptance itself contemplated that it would review the draft lease before entry into it, presumably reserving the right to comment upon its terms. While the 2009 lease may be a lease on "commercial terms", it is not the only lease that would meet that description and a proposal for a lease "on commercial terms" cannot be read as a proposal for a lease on those particular terms.
60This leads to a second and associated difficulty, of certainty as to the proposed terms of the lease. The range of terms which may properly be described as "commercial terms" is wide, and it does not seem to me that, even if a proposal to offer a lease on "commercial terms" was intended to have contractual effect, it would be possible to determine that any particular lease satisfied that requirement to the exclusion of an equally commercially reasonable but different lease. The uncertainty as to the concept of "commercial terms" can be illustrated by a simple example. The 2009 lease provided for a guarantee of 3 months of the rent at commencement. It would be open to OXS to contend that, because it has been in occupancy of the premises for a substantial period, the guarantee in any new lease should be for a lesser period; it would be open to SHFA to argue that the guarantee should be for a longer period, or one party could contend that the guarantee should be for the same rental period while the other argued that it should be increased or reduced. None of those positions is necessarily inconsistent with a lease on "commercial terms", and a guarantee for 1 months rent or 4 months rent is not obviously less "commercial" than a term than a guarantee for 3 months rent. It follows that an agreement that a lease is to be on "commercial terms" does not identify the amount of the guarantee that is to be provided under the lease, a matter that is of real significance to the lessor, the lessee and the guarantors.
61Another example of the uncertainty of the phrase "commercial terms" is that, as SHFA points out, the terms of the lease had been varied when OXS took an assignment of the earlier lease from Ms Ammann in 1996 to include cl 4(n) concerning the appointment of a head chef, which was agreed to be an "essential term of the Lease", but no such provision is found in the lease commencing 1 July 1999. A lease that included that provision could properly be described as one on "commercial terms", but so could a lease that did not. An offer of, or an indication of a preparedness to offer, a lease on "commercial terms" did not resolve whether such a term would or would not be included in that lease. It seems to me that a range of provisions dealing with turnover rent and rent reviews, which had also not been agreed, would be capable of being described as on "commercial terms" and that description again did not indicate the particular terms that were to apply.
62In Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 514, Lord Wright LJ noted that it was the Court's duty to construe contracts made by business persons "fairly and broadly, without being too astute or subtle in finding defects" but at the same time observed that the Court cannot:
"make a contract for the parties, or ... go outside the words they have used, except in so far as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the Court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail."
63I recognise that the terms of the February 2011 letter are less uncertain than that considered by the High Court of Australia in Whitlock v Brew [1968] HCA 71; (1968) 118 CLR 445, since both the commencement date of the proposed lease and its period were specified by the February 2011 letter. Nonetheless, the reference to "commercial terms" seems to me to have similar difficulties to those noted in Love & Stewart Ltd v S Instone Ltd (1917) 33 TLR 475 (where a contract was "subject to strike-out and lock-out clauses"), Bishop & Baxter Ltd v Anglo Eastern Trading & Industrial Co Ltd [1944] 1 KB 12 (where an order was "subject to war clause") and Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 (where a further agreement was to be subject to "all reasonable and usual warranties, terms and conditions for a transaction of this nature"). In each of those cases, the relevant contracts were held to be too uncertain to create binding obligations where the clauses not yet agreed could take many forms, and any change of terms could significantly alter the content of the contract. In Sandtara Pty Ltd v Longreach Group Ltd [2008] NSWSC 373, Bergin J (as her Honour then was) noted several authorities which had held that contracts dealing with the sale at "reasonable price" of items of property were sufficiently certain and observed (at [87]) that:
"Judicial statements to the effect that the Courts should not be seen as contract wreckers and that implications of what is just and reasonable are able to be ascertained by the Court as a matter of machinery where the contractual intention is clear but silent on some detail are not controversial."
Her Honour nonetheless held that the contract in issue in that case was not sufficiently certain, where an agreement was reached to pay a "reasonable" fee where other essential aspects of the agreement were not agreed.
64OXS also referred to the decision in Industry Research and Development Board v Bridgestone Australia Ltd [2000] FCA 1588, which dealt with the question whether a particular arrangement was on "ordinary commercial terms". I do not find that decision to be of assistance, since it seems to me uncontroversial that the Court can determine whether a particular agreement meets a description of "normal commercial terms", at least when assisted by evidence as to the range of commercial terms adopted in a transaction of the relevant kind. The problem in this case is not to reach such a determination, but whether it is possible in this case to reason in the opposite direction, by identifying the particular terms of a particular agreement from the range of possible terms that might constitute "commercial terms".
65It seems to me that the lack of precision in the term "commercial terms" is another indication that the parties did not immediately intend to be bound by the February 2011 letter and its purported acceptance by OXS. If, contrary to my view, that letter would otherwise have had immediately binding effect, it would fail for lack of certainty.
Whether the conditions to the February 2011 letter had to be satisfied by 1 July 2011
66By leave granted on the first day of the hearing, SHFA amended its Defence to paragraphs 20-22 of the Statement of Claim to plead that if, which is denied, the terms of the February 2011 letter constituted an agreement, that agreement was subject to the conditions there stated being satisfied by 1 July 2011 which did not occur. In particular, SHFA submits that the only sensible commercial construction to be placed on the second proviso is that, as from 1 July 2011, SHFA would have the contractual benefit of additional turnover rent from the outside seating area. SHFA did not contend that there should be implied a wider term that those conditions be satisfied within a reasonable term, which might arguably more readily have been implied.
67OXS submits that the background facts support a construction that the specification of 1 July 2011 in the February 2011 letter was only intended to refer to the commencement date of the lease; that the February 2011 letter was not stated to be open for any particular period of time and could have been accepted by OXS after 1 July 2011; that the 2009 lease was then operative until 30 June 2014 so there was no urgency at the time of the February 2011 letter for the offer to be accepted, for any conditions to be satisfied or for a new lease to be entered into; and, as the evidence establishes, that parties had previously executed leases some time after their commencement date. Each of these submissions seems to me to have force.
68It also seems to me that it was also unlikely that the parties' objective intention was to set an absolute cut-off date for satisfaction of the conditions, so that a lease would not be granted if, for example, the conditions were satisfied on 2 July 2011, as distinct from, for example, a requirement that they be satisfied within a reasonable time in all the circumstances. I am reinforced in that view by the fact that, as OXS points out, there would be at least a significant risk that those conditions could not have been satisfied by that date even if (which was not the case) OXS had made diligent efforts to satisfy them. Mr Shillito's evidence, which I accept, was that the process of obtaining development consent from City of Sydney Council generally took between 8 and 12 weeks, although the process could take longer or less than that (Shillito 16.7.2014 [10], T127). As OXS points out, it would also take some time to prepare the development application and then obtain landowner's consent from SHFA, have the formal lease prepared and executed and provide a surrender. By contrast with that evidence, there was only 4 months between the time of the OXS's purported acceptance of the February 2011 letter and 1 July 2011.
69OXS also submits that, if the Court was satisfied that the agreement for lease incorporated a provision that the conditions were required to be satisfied by 1 July 2011, the evidence demonstrates that SHFA did not co-operate with OXS in seeking to expedite the process of obtaining the Outdoor Seating Licence nor did it prepare and provide a formal lease or form of surrender for execution. OXS refers to Mr Shillito's evidence that SHFA's insistence on the indication of a fire egress path on the plan was uncommon and not something Mr Shillito had seen on a plan before in his experience as a town planner (T133). However, Mr Shillito accepted in cross-examination that SHFA's interest in fire safety was not unreasonable. Still less does it amount, as OXS contended, to an "example of SHFA obfuscation in relation to the outdoor seating licence". Had I accepted SHFA's construction of the February 2011 letter, I would have held that OXS's delay in taking any meaningful steps to satisfy the conditions of the letter, rather than any conduct of SHFA, was the primary reason that any prospect that they would be satisfied by 1 July was lost.
Whether ministerial consent was given
70The next issue that arises is whether ministerial consent was given to any lease agreement between SHFA and OXS for the purposes of s 19 of the SHFA Act. That section provides that SHFA cannot dispose of core land other than in certain circumstances (ss 19(1) and (2)); that SHFA may, with the consent of the Minister and subject to such conditions as the Minister thinks fit, lease or grant licences in respect of core land (s 19(3)); and that requirement for consent does not apply to a lease or licence that does not exceed 5 years (s 19(4)). Mr Free, who appears for the Minister, points out that this section is one of a series of provisions in Pt 4 of the SHFA Act concerned with the powers of SHFA to deal with land vested in it, which differ according to the classification of land. He points out, and I accept, that the consent required by that section is to a particular dealing in core land, relevantly, a particular lease or agreement for lease, and that act may be subject to conditions imposed by the Minister.
71It was common ground that the Minister's consent was required for any grant of a 10 year extension of the lease for the Premises, since the Premises are "core land" within the meaning of s 6 of the SHFA Act. I also do not understand OXS to have contested SHFA's submission that this section also applies to an agreement to lease. I accept that submission, both because the contrary view would not be consistent with the statutory purpose of the section, namely, to impose ministerial control on the alienation of core land, and because a similar view has been taken in respect of similar issues in respect of a requirement for consent under s 20 of the Town Planning and Development Act 1928 (WA): Glass v Ralph [1966] WAR 91; (1966) 13 LGRA 90 at 94-95; Wilson International Pty Ltd v International House Pty Ltd [1983] WAR 243; (1981) 52 LGRA 216 at 225.
72This issue raised several questions. The first is a factual and legal issue, namely whether the then Minister had in fact consented to SHFA's entry into the lease agreement in a manner that satisfied the requirement under s 19 of the SHFA Act. If that question is answered in the negative, further issues arise as to whether the entry into any lease agreement by SHFA (if, contrary to my view, such a lease agreement would otherwise have been effective in contract) was valid notwithstanding the lack of such consent; and whether SHFA is now bound, by any implied term in any lease agreement, to seek such consent from the current Minster.
73I will first address the question whether such consent was given in fact, in a manner that satisfied the requirements of s 19 of the SHFA Act. That question turns on the meeting between Mr Watkins and the then Minister, Mr Kelly, to which I have referred in the chronology set out above. That meeting is pleaded in paragraphs 16-17 of OXS's Statement of Claim as follows:
"16. Between 28 January 2011 and 23 February 2011, Watkins met with Minister Kelly and discussed [OXS's] proposal.
17.During the meeting referred to in the previous paragraph:
(a) Watkins informed Minister Kelly that outstanding matters with [OXS] could be resolved by the offer of a new 10 year lease over the Premises to [OXS] on commercial terms and subject to resolution of some matters of concern to [SHFA]; and
(b) Minister Kelly instructed Watkins to proceed accordingly."
The reference to consent in these pleadings should be understood as a reference to consent under s 19 of the SHFA Act to which I have referred above. Paragraph 19 of the Statement of Claim in turn pleads that the "offer" made in the February 2011 letter was "made to [OXS] with the consent of Minister Kelly". Paragraph 19 of SHFA's Defence denies that any offer arising from the February 2011 letter was made to OXS with Minister Kelly's consent and alternatively pleads that, if, which is denied, that letter was sent with the Minister's consent:
"any such consent if given (which is denied) did not constitute consent for the purposes of section 19 of the [SHFA Act]."
74OXS relies on Mr Watkins' evidence, which I set out in paragraph [27] above, to demonstrate that Minister Kelly consented to SHFA's "offer" and there was, therefore, ministerial consent to SHFA entering into a new lease with OXS "on the terms offered" under s 19 of the SHFA Act. SHFA contends that Mr Watkins' evidence should not be accepted. There are elements of that evidence that were, at best, confusing and, at worst, unsatisfactory. Mr Watkins' evidence was confusing as to when, as he said, he reached a "final position" as to the proposed offer to OXS and made a decision to make that offer on "all the facts before [him]", and that confusion was exacerbated by the lack of clarity as to when he had met with the Minister. Mr Watkins' evidence was also unclear as to whether he made a firm proposal to offer a lease to the Minister, or only made a decision to make such an offer or as to the terms of the offer after his conversation with Minister Kelly and with Ms Garrick (T84) and after Ms Garrick's email dated 15 February 2011 (Ex D4) (see also T89-90, 91, 94, 96, 114). It is therefore also unclear whether any conversation with the Minister involved no more than "in principle" approval to a possible course of action, and not to the terms of an offer of lease that had not yet been formulated. That position is not sufficient to establish that the Minister had in fact consented to the proposal for the purposes of s 19 of the SHFA Act.
75Mr Watkins also did not refer, in his evidence in chief, to having discussed the legal advice to SHFA recommending against the grant of a new lease to OXS with Minster Kelly in this conversation. His evidence in cross-examination was that he had done so. It seems to me that Mr Watkins is likely to be mistaken as to his recollection of that matter in cross-examination. It seems to me to be unlikely that the Minister would have given oral consent to a lease, the substantive terms of which had not been disclosed to him, in a brief conversation in the form set out by Mr Watkins, after he had been informed that SHFA had received legal advice recommending that it not enter into that lease, and still less if he had been informed of the substance of that advice. I also have considerable difficulty with Mr Watkin's evidence in cross-examination that he had raised the application of the ICAC Guidelines and SHFA's lease expiry policy with the Minister, a matter that was also not addressed in his affidavit evidence (T108-109). If Mr Watkin's evidence in that respect were accepted, the proposition that the Minister would then proceed, without further inquiry, to grant oral approval for a long term lease proposal described in the most general terms, although on notice of those guidelines and policy, appears even less likely.
76It also seems to me that the information that would necessary to give such consent was not provided to Minister Kelly and that supports an inference that the relevant dealing was merely conveying information, or seeking an approval of a possible course of action, rather than seeking or giving consent to a lease under s 19 of the SHFA Act. I have set out Mr Watkins' evidence as to the limited information that he provided to Minister Kelly in paragraph [27] above. Mr Watkins did not, on his own account, advise Mr Kelly of the proposed content of the "commercial terms" of the lease or of the nature of the "matters of concern to SHFA" or how they were to be resolved, which seem to me to be relevant matters to the Minister's decision whether to approve a proposed lease. Mr Watkins also did not, on his own account, advise Mr Kelly that what was being sought was not merely an indication that the Minister had no objection in principle to his taking the proposed course (implicitly, on the basis that a statutory approval would later be sought under s 19 of the SHFA Act) but an oral approval for the grant of a lease on terms that had yet to be agreed with OXS for the purposes of s 19 of the SHFA Act. By contrast, when SHFA requested ministerial consent for the variation of another lease involving the Kazal Group (Garrick 6.5.14, Annexure "A"), it provided a summary of the proposed lease and licence terms, which refers to the permitted use; the amount of the base rent to be charged; the building area and rate per square metre; the provision for rent reviews and turnover rent and the provision for bank guarantee. These are plainly key terms of a lease and it seems to me highly unlikely that the Minister would understand that he was being asked to grant consent to a lease, for the purposes of s 19 of the SHFA Act, or would purport to do so when he had been provided with none of this information by Mr Watkins in respect of the Premises.
77SHFA submits that, on its proper construction, s 19(3) of the SHFA Act requires that the Minister give his consent to particular proposed transactions with specificity as to terms, and would not be satisfied by a consent to the bare proposition that a lease was to be granted without disclosure of its substantive terms. OXS responds that, as at February 2011, SHFA owned and maintained more than 230 retail and commercial tenancies, 95 heritage buildings and more than 25 residential tenancies in the Rocks area (T192-193), although I interpolate that it is not clear from the evidence whether all of those properties are "core land" or whether all leases in respect of them would be greater than 5 years so that a requirement of ministerial consent would apply. OXS submits that:
"The suggestion that a Minister of the Crown with extensive Ministerial and parliamentary obligations would be required to micro manage or descend into the detail of each and every one of its tenancies is ridiculous. In circumstances where the CEO of SHFA [Mr Watkins] discussed a particular lease with the Minister (including the essential terms he was proposing) and recommended a course such as the making of the [February 2011 letter] be undertaken, it was entirely appropriate for the Minister to instruct the CEO to proceed, without himself sitting down and conducting a detailed review of the terms and conditions of the lease - particularly where the evidence is that SHFA repeatedly used registered lease memoranda to incorporate usual terms and conditions into its leases."
78It seems to me that the question is not whether the relevant minister is required to "micro manage" SHFA's leasing activity, but whether consent can be given for the purposes of s 19 of the SHFA Act without disclosure of the material terms of the relevant lease. The proposition in that submission that Mr Watkins discussed the "essential terms he was proposing" requires the qualification that, as noted above, those terms did not include key terms of the lease (which had not been discussed with OXS) such as the actual rent to be paid or the amount of the guarantees to be given. The proposition that SHFA used lease memoranda to incorporate usual terms and conditions does not have regard to the fact that a schedule to the relevant lease dealt with variable conditions, including, for example, the rent payable and the amount of the guarantees to be given.
79For these reasons, I find that ministerial consent was not given, or at least was not effectively given, for the purposes of s 19 of the SHFA Act to the entry into a lease agreement with OXS by the February 2011 letter.
80A further issue arises as to whether the entry into any lease agreement by SHFA (if, contrary to my view, such a lease agreement would otherwise have been effective in contract) was valid notwithstanding the lack of such consent. That question turns upon the proper construction to be given to s 19(3) of the SHFA Act which, as I noted above, provides that SHFA may, with the consent of the Minister and subject to such conditions as the Minister thinks fit, lease or grant licences in respect of core land. The principles to be adopted in determining that question are well-established. In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, the majority of the High Court summarised the process of statutory construction as follows:
"The duty of a Court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the cannons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."
In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47], the joint judgment observed (references omitted) that:
"This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy."
See also Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 293 ALR 257 at [39]. The language of s 19(3) of the SHFA Act makes clear that ministerial consent to the grant of a lease is required, but does not specify when such consent is to be obtained, and it seems to me that that section must be interpreted so as to give effect to the Minister's ability to impose conditions on the grant of a lease.
81OXS submits that if (as is the case) the Court is not satisfied that Minister Kelly provided consent in advance of the February 2011 letter, that does not invalidate the February 2011 letter or the concluded agreement for lease. On the other hand, SHFA submits that, on the proper construction of this provision, the consent of the Minister must be obtained prior to the entry into the relevant lease. It points out that s 19 of the SHFA Act permits SHFA to do an act in the law, namely, "lease or grant licences", but only with the consent of the Minister, and provides SHFA with the power to do an act which it otherwise has no power to do. There seems to me to be substantial force in the proposition that the phrase "with the consent of the minister" contemplates that the consent exist at the point of that step.
82OXS relies on the decision of the High Court of Australia in Butts v O'Dwyer [1952] HCA 74; (1952) 87 CLR 267 as authority that ministerial consent is not required prior to the entry into the relevant agreement for lease and the necessary consent may be obtained after the entry into that agreement. In that case, the plaintiff entered into a memorandum of lease of real property within the scope of s 272(2) of the Crown Lands Consolidation Act 1913 (NSW) which relevantly provided:
"Application for permission to transfer by way of sale, lease or otherwise except by way of mortgage or discharge of mortgage any such holding ... shall be made to the Minister in the prescribed form, and such transfer shall not be effected, or if effected shall not be valid, unless the Minister's consent thereto has been obtained. The Minister shall have discretion to give or refuse such consent, which discretion shall be independent of the recommendation (if any) of the local land board; but the Minister shall not refuse consent unless the matter has been referred to the local land board for recommendation." (emphasis added)
The plaintiff then exercised an option to purchase the land under that lease, at a time that he had not obtained the Minister's consent to the lease. The High Court held that the provision permitted the consent of the Minister to be obtained after the relevant transfer in order to validate that transfer. However, that finding seems to me to have depended on the words "if effected shall not be valid, unless the Minister's consent thereto has been obtained" in 272(2) of the Crown Lands Consolidation Act, which necessarily contemplated that a transfer might be effected without such consent, albeit it would not be valid, so that the requirement for consent did not go to the power to effect a transfer as distinct from its legal effect. Dixon CJ, Williams, Webb and Kitto JJ (at 279) contrasted that situation with the position if those words were absent, observing that:
"If the sub-section simply provided that a transfer should not be effected unless the Minister's consent thereto had been obtained, it would be open to the construction that every memorandum of transfer given without his previous consent should be invalid. But the sub-section also provides that such a transfer shall not be valid unless his consent thereto has been obtained."
83This decision does not seem to me to assist OXS since there is nothing in s 19 of the SHFA Act that contemplates that an agreement for lease might take effect without the relevant consent, albeit subject to any reservation as to its validity pending such consent. As SHFA points out, s 272(2) of the Crown Lands Consolidation Act also did not provide for the Minister to impose conditions on such a consent, and did not raise the issue as to how such conditions could be imposed if the agreement bound the parties prior to the Minister's grant of any conditional consent. By contrast, s 19 of the SHFA Act permits the Minister to impose or require conditions, which it would be difficult or impossible to do, without breach of an agreement for lease or lease, after that agreement or lease was granted by SHFA on terms that did not include such conditions.
84The decision in Butts v O'Dwyer above was distinguished by the High Court in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, dealing with s 88B of the Industrial Arbitration Act 1940 (NSW). However, that decision seems to me to be of limited assistance since that section expressly avoided a lease that was granted without such consent. OXS also referred to the decision in Hill End Gold Ltd v First Tiffany Resource Corporation [2010] NSWSC 375, which dealt with the question of satisfaction of a condition in a contract as to approval under the Foreign Acquisition and Takeovers Act 1975 (Cth), and held that non-satisfaction of such a condition rendered an agreement voidable, not void. I accept that proposition, but it does not seem to me to be relevant to this case, where the question is not the effect of a condition to the contract requiring a particular approval, but the effect of a statutory provision which limited SHFA's ability to enter into the relevant transaction. OXS also relied on Taluja v Australian International Academy of Education Ltd [2011] NSWCA 416, where Young JA (with whom Beazley and Macfarlan JJA) approved the reasoning of a trial judge that, where a lease was not void by reason of a breach of a statutory provision, a term was to be implied that a party would take all reasonable steps to have the relevant lease registered. It seems to me that that reasoning was entirely consistent with Butts v O'Dwyer, but turns upon the premise that there was a subsisting agreement into which that term could be implied. That is not the case where, on the view that I take, s 19(3) of the SHFA Act required ministerial consent prior to the entry into the relevant agreement.
85A further issue arises as to whether SHFA is now bound, by any implied term in any lease agreement (if, contrary to my view, such an agreement were established) now to seek such consent from the current Minister. Paragraph 22(b) of OXS's Statement of Claim pleads such an implied term, which is particularised as a term implied in fact and law, of the agreement for lease said to arise from the February 2011 letter that:
"in the event that Minister Kelly or any other person with ministerial responsibility for [SHFA] had not yet given consent to the entry of a new lease in the terms of the [February 2011 letter] (which is denied), [SHFA] would take all prompt and reasonable steps to obtain such consent."
86OXS also relies on Butts v O'Dwyer above (at 279-280) as authority that an agreement for lease will include an implied term that SHFA will do all that was reasonable to obtain ministerial consent. The plurality in that case treated the relevant agreement (at 280) as a concluded agreement "subject to a condition that it is not to become effective unless the Minister's consent ha[d] been obtained", which gave rise to "an obligation on the part of the person giving the transfer to do all that was reasonable on his part to the end that the Minister's consent might be obtained". That conclusion seems to me to depend on their Honour's reasoning that the section did not require such consent prior to the relevant transfer which, as I noted above, follows from the specific treatment of the position if that transfer was made without prior consent in s 272(2) of the Crown Lands Consolidation Act. Since that section expressly contemplated that a transfer could take place without the minister's consent, although it would not be valid at that point, it left open the possibility that consent could later be obtained, thereby providing a basis for an implication that the person giving the transfer should do all that was reasonable on his or her part to obtain that consent. There seems to me to be no basis for such an implication in this case where, as I have held, s 19 of the SHFA Act does not authorise the entry into a lease or lease agreement without prior consent, subject to such conditions as the Minister imposes, because there would then be no utility in an implied requirement for SHFA to obtain subsequent consent to such an agreement which would not cure that lack of authority. A similar conclusion was reached in respect of s 20(1)(a) of the Town Planning and Development Act in Wilson International Pty Ltd above at 228, although the Court was there dealing with a section which expressly prohibited the entry into an agreement without consent.
87To the extent that OXS contends that such a term is implied in fact, rather than in law, the requirements for the implication of that term are those set out by the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283, as approved by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347, namely the specified term (1) must be reasonable and equitable; (2) must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) must be so obvious that "it goes without saying"; (4) must be capable of clear expression; and (5) must not contradict any express term of the contract. In my view, the suggested implied term does not satisfy several of those requirements. In particular, if it be assumed that SHFA had entered a lease agreement without ministerial consent, it seems to me that it is by no means reasonable or equitable or so obvious that it goes without saying that it should be required to take steps to obtain consent which it does not consider that the Minister would properly give. Indeed, it seems to me that such a requirement would substantially interfere with the relationship between SHFA and the Minister, who ought to be entitled to assume that SHFA would only seek consent for a lease which it properly considered should be given.
Discretion as to specific performance
88An order for specific performance requires a party to a contract to perform its obligations under that contract according to its terms: Meagher, Gummow & Lehane, Equity: Doctrines & Remedies (4th ed 2002, Butterworths) at 651. In JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 297, Dixon J (as his Honour then was) noted that such an order:
"...is not available unless complete relief can be given, and the contract carried into full and final execution so that the parties are put in the relation contemplated by their agreement." .
89OXS does not, at least as its primary position, seek an order that SHFA now grant a lease in the form contemplated by the February 2011 letter, namely, a lease commencing 1 July 2011, but instead a lease commencing 1 July 2014, including updated rental and guarantee figures. SHFA rightly points out that this is not what the parties had agreed, if the February 2011 letter and OXS's letter dated 28 February were contractually binding, which was that the lease commence on 1 July 2011. OXS responds to this difficulty by suggesting that the Court could instead make an order that the parties enter a lease commencing 1 July 2011. It does not seem to me that such an order is now open, because the parties have in fact both conducted themselves since 1 July 2011 under the terms of the 2009 lease. It does not seem to me now to be appropriate to make an order that would have the result that the parties were bound by two leases, potentially in different terms, over that three year period.
90SHFA also submits that an order for specific performance will not be made where a contract, although not so uncertain as to be unenforceable at law, is too uncertain to permit formulation of the order for specific performance: Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 at 14; [1997] 3 All ER 297. It seems to me that the findings that I have reached above, in holding that the arrangement contemplated by the February 2011 letter was too uncertain to have contractual effect, would alternatively require than an order for specific performance not be made for that reason. Once it is accepted that, as I have held, the terms of the 2009 lease are not the only terms that would qualify as "commercial terms", then an order that the parties perform an agreement to enter a lease "on commercial terms" would be too uncertain to be enforced.
91For completeness, I should add that, in closing submissions, Counsel for SHFA submitted that specific performance should also be refused on the, possibly overlapping, ground that there has been gross delay on the part of OXS (T158). OXS submits that that submission is not available to SHFA on the pleadings and pointed to Senior Counsel for OXS's observation in his opening address that SHFA had raised no equitable defences, including delay or laches and there was no issue about such matters (T14), and that SHFA did not plead delay or laches in the Amended Defence that it was granted leave to file on the first day of the hearing. OXS also submits that it would be irreparably prejudiced by SHFA raising such matters at this late stage. It is by no means clear to me that OXS would be prejudiced by that matter, where the timing of events and the expedition with which OXS on the one hand and SHFA on the other conducted themselves has been the subject of detailed evidence by both parties. However, it does not seem to me to be necessary to address a specific defence of delay, given that I would not make an order for specific performance for the other reasons noted above.
Claim for damages for breach of contract
92Alternatively, OXS brings a claim for damages for breach of contract. OXS contends that, if the Court does not make an order for specific performance, the evidence nevertheless supports the Court finding that the terms pleaded in paragraph 22 of the Statement of Claim were implied as matters of fact and law and that SHFA breached the agreement for lease in the manner pleaded in paragraph 44 of the Statement of Claim and that, by reason of the August 2011 letter and subsequent communications, it repudiated the agreement for lease. OXS submits that the breaches by SHFA "were flagrant and in contumelious disregard of the agreement for lease." OXS submits that it is entitled to damages for breach of contract, with damages to be assessed at a subsequent hearing in accordance with the orders made on 25 March 2014. This claim must fail since I have held that the February 2011 letter and OXS's purported acceptance of it did not have immediately binding effect and, if I were incorrect in that finding, were not sufficiently certain to have contractual effect.
OXS's claim for misleading or deceptive conduct
93Alternatively, OXS brings a claim for misleading or deceptive conduct. By its Summons, OXS sought a declaration that SHFA, in trade or commerce, engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law, in representing to OXS by the February 2011 letter that it was prepared to offer OXS a new 10 year lease commencing on 1 July 2011 on commercial terms at the prevailing market rate, and subject to specified conditions. In the further alternative, OXS claimed relief under s 62D of the Retail Leases Act in respect of misleading or deceptive conduct.
94It is uncontroversial that whether conduct amounts to misleading or deceptive conduct is a question of fact to be answered in the context of the evidence as to the alleged conduct and the relevant surrounding facts and circumstances: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 199 per Deane and Fitzgerald JJ. It is not necessary for OXS to establish that SHFA intended to mislead or deceive and that the relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive, and conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 197 per Gibbs CJ, 216 per Brennan J; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [112] per McHugh J.
Binding Lease Representation (Statement of Claim [23])
95Paragraph 23 of the Statement of Claim pleads that:
"The conduct of [SHFA] in making the SHFA Offer, receiving [OXS's] acceptance letter dated 28 February 2011 and failing to communicate that there was any issue with the formation of a binding and valid agreement in the terms of the Lease Agreement amounted to a representation by [SHFA] to [OXS] that the parties had entered into a binding Lease Agreement and that [SHFA] would act accordingly ("[Binding Lease Representation")."
OXS contends that that representation flowed from the combination of the written communications and the absence of any relevant qualification, and that this representation continued up and until 23 August 2011.
96SHFA points out that an allegation of misleading or deceptive conduct by silence can only be established if conduct is undertaken otherwise than inadvertently, by reason of s 2(2)(c)(i) of the Australian Consumer Law. SHFA submits, and I accept, that there is no evidence to suggest that SHFA advertently failed to engage in a process of advising OXS as to whether the February 2011 letter was capable of having legal effect. There is no evidence that it ever occurred to SHFA that such advice should be given. However, it seems to me that this allegation is not an allegation of mere non-disclosure, so far as it also turns upon the pleaded conduct in respect of the February 2011 letter and OXS's purported acceptance of it, and it is necessary to address it on that wider basis.
97The pleaded representation is directed to the legal status of the relevant agreement which (as the issues that I have addressed above indicate) turns on a much wider range of issues than whether the Minister had given consent to the February 2011 letter, a matter which (as I will note below) Mr Kazal addressed in his evidence. OXS submits that SHFA's conduct was misleading or deceptive so far is it had not advised OXS that whether its purported acceptance of the "offer" in the February 2011 letter was legally effective was open to dispute. It seems to me that it was not misleading or deceptive for SHFA not to express any view as to a legal question of that character, both because I infer that, at the time OXS's letter was received, it had no such view (or at least no concluded view) since it later sought legal advice as to that question, and because it was in no better position than OXS to form an opinion as to whether an exchange of correspondence gave rise to a legally binding agreement. Each party had access to legal advisers, and it does not seem to me that OXS had any reason to think that it could look to SHFA for advice as to whether its purported acceptance of the "offer" in the February 2011 letter was effective.
98Mr Kazal's evidence was not directed, in terms, to the pleaded representation, as to whether he understood SHFA to have represented that the exchange of correspondence was a binding lease or relied on such a representation. He gave evidence as to a narrower, but related, question as to his understanding that the Minister had consented to the relevant arrangements. His evidence is that he had received other correspondence from SHFA offering leases expressed to be conditional on the Minister's consent and, as the letter had no such condition, he assumed the Minister had already given his consent (Kazal 24.3.14 [18]). Mr Kazal's evidence was also that he expected SHFA to send him a new lease with the same basic terms as the existing lease for the Premises with the starting rent to be set at a market rent with CPI reviews and market rent reviews as in the Existing Lease (Kazal 24.3.14 [20]). OXS submits there was no challenge to Mr Kazal's evidence as to the former assumption in cross-examination. It does not seem to me that there was any breach of the rule in Browne v Dunn (1893) 6 R 67 in that regard, where it was clear from the pleadings that the parties were at issue as to that matter and little could be gained from a merely formal challenge as to Mr Kazal's state of mind.
99To the extent that Mr Kazal made such an assumption, it does not seem to me to be a reasonable one. It does not seem to me that Mr Kazal could reasonably have assumed that the Minister would have consented to the grant of a lease without knowing its commercial terms, and Mr Kazal knew that these terms had not then been agreed, and that OXS itself had expressly reserved the ability to comment on the terms of a proposed lease. SHFA's silence as to the question of ministerial consent was at least equally consistent with such consent not yet having been deferred until OXS had satisfied the conditions set out in the February 2011 letter; a draft lease had been submitted to OXS as it had requested and it had made the comments that it had foreshadowed; any areas of disagreement as to the commercial terms of the lease had been addressed; and, if the terms of the lease were then agreed, the Minister was advised of their substance so as to reach an informed decision whether to consent to them.
First Provision of Registrable Form Lease Representation (Statement of Claim [24])
100Paragraph 24 of the Statement of Claim pleads that:
"During the period from March to August 2011, [SHFA] represented to [OXS] that a formal lease in registrable form would be provided to [OXS] as soon as [OXS] organised an outdoor seating licence for the Premises ("First Provision of Registrable Form Lease Representation")."
That representation is particularised as having been made by Mr Noble on behalf of SHFA to Mr Kazal of OXS during telephone discussions between March and August 2011.
101Mr Kazal's evidence was that he regularly rang Mr Noble on his mobile phone from March to August 2011 to discuss various matters, including following up on the new lease for the Premises. In cross-examination, he altered that evidence to indicate those calls had also been made on his land line, appearing to anticipate a challenge to that evidence by reference to his mobile phone records. Mr Kazal's evidence is that Mr Noble said words to the effect:
"As soon as you get the outdoor licence organised we will issue the new lease" (Kazal 24.3.14 [22] ("Second Representation").
102Mr Noble denies that he said those words and his evidence is that he had only spoken to Mr Kazal once or twice from March to August 2011 (Noble affidavit 29.4.14 40) and that:
"I recall thinking that they had not made any steps to comply with the three conditions to be offered the new lease." (Noble 29.4.14 40).
In cross-examination, Mr Noble's evidence was that he had that state of mind during the entire period from March to August 2011 when the conversation was said to have taken place (T220-221). OXS submits that Mr Noble was incorrect as to that matter, which was inconsistent with his instructions to SHFA's solicitors (to which I referred in paragraph 33 above) that the Kazals had undertaken "some preliminary works to lodge the D[evelopment] a[pplication]s", that he did not acknowledge that error in cross-examination (T220-222) and that "[h]is failure to acknowledge that error did him no credit". OXS also points to an inconsistency between Mr Noble's reference in his affidavit to one or two conversations with Mr Kazal, to which I have referred above, and his evidence in cross-examination denying any conversations with Mr Kazal between March and August 2011 (T248). OXS in turn submits that:
"That denial was typical of Mr Noble's unhelpful and argumentative evidence. His evidence on this matter in particular has been discredited and the evidence of Mr Kazal should be preferred."
103I accept that Mr Noble's evidence as to this matter was somewhat imprecise and that he had a tendency to be somewhat argumentative in his response to aggressive cross-examination by Senior Counsel for OXS. I do not give these matters the weight which OXS seeks to give to them. First, Mr Noble was being asked to address a conversation that was said to have occurred at some time in a six month period, and the imprecision of Mr Kazal's evidence as to that matter would not have assisted a response to it. Second, the distinction between OXS having undertaken "some preliminary works" and no work to satisfy the condition as to the development approval as to the courtyard is one of degree and, had Mr Noble expressed himself more precisely by saying OXS had done nothing of substance to comply with that condition, he would have been correct. Third, I accept the substance of Mr Noble's evidence that he had little contact with Mr Kazal over the period. Fourth, the propositions that Mr Noble's evidence was imprecise or that he did not respond particularly well to aggressive cross-examination do not lead to the conclusion that he was not giving honest evidence to the best of his ability or that Mr Kazal's evidence should be preferred to his evidence.
104OXS submits that this representation is supported by Mr Noble's later instructions to SHFA's solicitors which indicate that, as at 28 July 2011, he considered that there were "arrangements" between SHFA and OXS by reason of the February 2011 letter and OXS's purported acceptance which required advice to "unwind" them (Ex P5). Mr Noble was plainly aware that the exchange of correspondence had occurred and it was plainly prudent to seek advice as to its effect in that situation. It does not seem to me that the reference to "arrangements" in those instructions or the seeking of such advice provides any support for a finding that Mr Noble would have made a representation that reinforced an "arrangement" that he had at all relevant times opposed.
105I do not accept that such a representation was made, since Mr Noble had consistently opposed the approach adopted by Mr Watkins in dealing with OXS and he had no reason to make such a representation to Mr Kazal. I prefer his evidence that he did not do so to Mr Kazal's evidence in this respect. In reaching the view that I should prefer Mr Noble's evidence to Mr Kazal's evidence in this regard, I have had regard to the case law dealing with the assessment of the credit of witnesses in cases where a trial judge is faced with a choice between irreconcilable accounts, as is the case here in respect of the alleged representations: McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477 at [28]; Craig v Silverbrook [2013] NSWSC 1687 at [142]; Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [10]. It seems to me that Mr Noble's evidence is consistent with the probabilities as they emerge from the objective evidence of his, and SHFA's, then approach to a lease renewal for OXS.
106I note, for completeness, that OXS also criticises several other aspects of Mr Noble' evidence, including his evidence as to whether he was discussing the legal advice obtained by SHFA with Mr Watkins on 15 August or 22 August 2011; and whether he again addressed the board as to that matter on 22 August and as to the manner in which the February 2011 letter was prepared by Mr Watkins. I have not disregarded these matters, but I do not consider it necessary to determine them. Even if Mr Noble was mistaken as to each of those matters, it would not affect my view that his evidence should be preferred to Mr Kazal's evidence in respect of whether the alleged oral representation was made as pleaded by OXS.
107OXS also contends that the First Provision of Registrable Form Lease Representation was a representation as to a future matter and that SHFA has not established that it was reasonable at the time it was made, where it was subsequently withdrawn by the August 2011 letter. This question does not arise since I have not found that representation to have been made.
Second Provision of Registrable Form Lease Representation (Statement of Claim [25])
108Paragraph 25 of the Statement of Claim pleads that:
"In early August 2011 [SHFA] represented to [OXS] that [SHFA] would enter into a formal lease in registrable form once [OXS] had obtained an outdoor seating licence for the Premises ("Second Provision of Registrable Form Lease Representation")."
That representation is particularised as having been made by Mr Noble on behalf of SHFA to Mr Kazal and Mr Charif Kazal of OXS during a meeting in a coffee shop at The Rocks in early August 2011. Mr Kazal's evidence (Kazal 24.3.14 [24]) is that Mr Noble repeated the effect of the previous representation by using words to the effect:
"Before we enter into the new lease we need to get the licence for the outdoor area sorted out".
Mr Noble's evidence was that, to the best of his recollection, only another property, 91 George Street, was discussed at this meeting and he does not recall discussing the property at 135 George Street (Noble 29.4.14 [41]).
109OXS contends that the conversation is inherently likely to have taken place for the same reasons as advanced in respect of the First Provision of Registrable Form Lease Representation. I do not accept that submission for the same reasons I do not accept the corresponding submission in respect of the First Provision of Registrable Form Lease Representation. I would add that it seems to me highly unlikely that Mr Noble would have made such a representation to Mr Kazal shortly before SHFA sent a memorandum recommending a quite different approach to the then Minister, on or about 10 August 2011, where Mr Noble had been involved in the steps leading to the preparation of that memorandum. There was no obvious benefit, and considerable risk, to Mr Noble and SHFA in seeking to mislead Mr Kazal as to that matter at that time, and it seems to me less likely that Mr Noble would have taken that course where he had no reason to do so.
110If, contrary to Mr Noble's best recollection, anything was said as to 135 George Street at this meeting, the objective probability seems to be that it would have gone no further than a statement that SHFA would not address any lease proposal until the issues as to the outdoor area were resolved, a position that would have not have been inconsistent with the condition addressing that issue in the February 2011 letter and, on one reading, with the words which Mr Kazal attributes to Mr Noble. SHFA made a written statement to the same effect in its letter dated 2 August 2011, to which I will refer further below, which also does not seem to me to have been misleading or deceptive or likely or mislead or deceive for the reasons noted below.
111OXS submits that the Second Provision of Registrable Form Lease Representation was a representation as to a future matter and SHFA has not established that it was reasonable at the time it was made given the subsequent conduct of the August 2011 Letter. This question does not arise since I have not found that representation to have been made.
Ministerial Decision Representation (Statement of Claim [30])
112Paragraph 30 of the Statement of Claim pleads that, by the August 2011 Letter, SHFA represented to OXS that the Minister had made a decision in relation to the grant of a new lease to OXS in respect of the Premises; the Minister had indicated that he would not consent to a new lease to OXS in terms of the SHFA offer; and, for that reason, SHFA must withdraw the SHFA offer. OXS submits that the natural and ordinary meaning of the letter was that the Minister had made a decision in relation to the grant of a new lease to OXS, the decision of the Minister was that he would not consent to a new lease in the terms of the February 2011 letter and, as a consequence, SHFA must withdraw the February 2011 letter.
113OXS submits that this representation was false because neither the August ministerial briefing note nor any briefing notes before or after it sought the consent of the Minister to the proposed lease (Ex P6). SHFA points to an earlier ministerial briefing note (Ex D16, tab 56) where Minister Hazzard had indicated that he wished all tenancies held by the Kazal Group to be reviewed. It points out that, by the August ministerial briefing note, SHFA advised the Minister that it proposed to withdraw "offers" for lease including for the Premises. That ministerial briefing note contains a ticked box under the heading "Action" indicating that briefing note is "For Information" rather than "For Decision", and SHFA accepted in submissions that Minister Hazzard did not make a decision in that regard for the purposes of s 19 of the SHFA Act. The Minister did make a notation that no compensation was to be offered to the Kazal companies without his approval, in response to a recognition in that briefing note that the withdrawal of the "offer" made in the February 2011 letter might lead to a claim for wasted expenses by OXS, but that seems to me to take the matter no further where it contemplates an issue arising from SHFA's proposed action and does not itself involve a ministerial decision.
114SHFA points out that the August 2011 letter does not expressly refer to a decision of the Minister, and submits that that letter correctly and appropriately states the effect of the ministerial briefing note which was noted and approved by the Minister, in that the statement that the Minister "has indicated he will not consent to the proposed new lease" correctly represented a statement in the ministerial briefing note contemplating "that the Minister would not consent to the proposed new leases" and a statement in legal advice attached to the ministerial briefing note that contemplated that "the Minister has indicated that he will not consent to the proposed new leases".
115It seems to me that the August 2011 letter was misleading or deceptive or likely to mislead or deceive, because the Minister had not in fact indicated he would not consent to the proposed new lease. I accept that the ministerial briefing note and attached legal advice proceeded on that basis, and the surrounding circumstances suggest the Minister might well have given that indication had he been asked to give such an indication of his view. However, he was not asked to do so, had no reason to do so and there is no suggestion that he did so. I accept that, as OXS submits, the August 2011 letter attributed a position to the Minister which he had not adopted and which was in substance SHFA's position, and for that reason was misleading or deceptive or likely to mislead or deceive.
116OXS also submits that the August 2011 letter did not inform OXS that the intention of senior employees of SHFA at that time was to proceed to an open tender of the Premises at the end of the term of the current lease. It points out that a statement to the effect had been suggested by SHFA's solicitors in the draft letters attached to their February 2011 advice (Ex D16, tab 52) but that information was not conveyed to OXS. OXS also refers to Ms Garrick's acceptance in cross-examination that a failure to inform a tenant that it anticipated that there would be an open tender process at the end of the lease term could well influence how the tenant improved the property, and that SHFA did not inform OXS that the Premises would go out to an open tender process (T209). The former proposition is plainly correct, as a matter of possibility, but it does not establish that OXS in fact was influenced by that matter. The second proposition is also correct, but Mr Garrick's evidence, which I accept, was that SHFA had, unsurprisingly, not reached any concluded view as to that matter in 2011, three years before the expiry of the lease and long before the period in which negotiations for any renewal of the lease would occur in accordance with SHFA's policy. Any intention of particular staff of SHFA at that point could be no more than highly tentative, three years prior to the expiry of the lease, and any statement that SHFA made as to that matter would have had to be so qualified by the prospect that political, policy or market changes in the next three years might lead it to take a different course that it would have conveyed no useful or reliable information to OXS. It does not seem to me that SHFA's silence as to that matter at that point was misleading or deceptive or likely to deceive in the circumstances.
Further Ministerial Decision Representation and New Lease Negotiation Representation (SOC [31])
117OXS also pleads that, by a further letter 2 August 2012 to OXS (Ex P2, tab 20)), SHFA continued the representation that the Minister had indicated he would not consent to the proposed new lease. OXS submits that the representation with regard to the Minister's consent continued to be false. SHFA responds that the allegation that this letter was misleading or deceptive should be rejected for the same reasons given above in relation to the Ministerial Decision Representation. It seems to me that the representation as to the Minster's indication made in this letter was misleading or deceptive or likely to mislead or deceive, for the same reasons as the Ministerial Decision Representation was misleading or deceptive or likely to mislead or deceive.
118OXS also pleads that letter made a further representation that OXS was required to take steps to obtain an outdoor seating licence for the Premises and, once the outdoor seating licence had been obtained, SHFA would enter into negotiations for a new lease. That letter (Ex P2, tab 20) stated, relevantly, that:
"The Authority will not enter into negotiations for a new lease until the outstanding matter of outdoor seating has been resolved."
SHFS submits, and I accept, that sentence does not contain a representation that there will be further negotiations, and rather simply says there will be no such negotiations until OXS had addressed the outdoor seating area problem. SHFA also points out that, in any event, it then sent a letter dated 29 August 2012 (Ex D16, tab 40), to which I referred above, which referred to its lease expiry policy and enclosed a copy of it.
119OXS submits that the suggestion that SHFA would enter into negotiations for a new lease once the outdoor seating licence had been obtained was false because SHFA had made its mind up prior to 23 August 2011 that it would not enter into negotiations for a new lease and would engage in an open tender process. I also do not accept that submission, since the evidence to which I have referred above does not indicate that SHFA had made up its mind, in 2011, as to the position it would adopt as at lease expiry in 2014. OXS also submits that this representation was as to a future matter; that SHFA bears the onus of proving the representation was made reasonably at the time it was made and did not lead evidence going to that matter; and that it did not enter into negotiations for a new lease after the outdoor seating licence was obtained and ultimately issued a notice under s 44(1) of the Retail Leases Act. That issue does not arise since I have held that the pleaded representation is not established.
120OXS also submits that Mr Kazal relied upon this representation as the process of obtaining a development consent "restarted" after it was made. His evidence is that he continued to rely on that representation until shortly prior to the commencement of these proceedings and after SHFA had indicated that it would not renew the 2009 lease (Kazal 24.3.14 [32]). The question of reliance does not arise where the representation is not established. If it were necessary to decide it, I would hold that Mr Kazal had not relied on any understanding that a new lease would be granted if he progressed development consent, but on SHFA's clearly articulated position that OXS would not obtain such a lease without having addressed that issue. In other words, those steps were taken in order to keep open the prospect of a new lease, which could have been (but was not) granted under SHFA's lease expiry policy, not by reason of any assurance that it would be granted.
121I note, for completeness, that the further letter from SHFA dated 26 September 2011 reiterated SHFA's position that the Minister had indicated that he would not consent to the lease. That letter was not the subject of a pleaded representation, although it was addressed in OXS's submissions. It adds little to the pleaded Ministerial Decision Representation and Further Ministerial Decision Representation based on earlier correspondence to which I have referred above.
New Lease Forthcoming Representation (Statement of Claim [32])
122Paragraph 32 of the Statement of Claim pleads that:
"In late 2012 or early 2013, [SHFA] represented to [OXS] that once [OXS] obtained development application approval for the use of the outdoor area at the Premises, a new lease would be provided to [OXS] by [SHFA] ("[Seventh] Representation")."
This pleading is particularised by reference to a representation alleged to have been made by Mr Noble during a meeting with Mr Kazal in late 2012 or early 2013. Mr Kazal's evidence was that, in late 2012 or early 2013, Mr Noble made a further representation that once development approval was obtained for the outdoor courtyard, a new lease would be provided to OXS (Kazal 24.3.14 [39]. OXS submits that the statement is consistent with the letter containing the New Lease Negotiation Representation, which I have addressed above.
123Mr Noble denied making this statement (Noble 29.4.14 [58]; T250) and pointed out, in evidence admitted subject to a limitation under s 136 of the Evidence Act, that he would not have made such a statement where he had assisted his superior, the Acting General Manager of SHFA, to draft a letter advising OXS that the offer of the lease had been withdrawn because the Minister did not consent to it.
124Several difficulties in respect of Mr Kazal's evidence in respect of this matter arose in his cross-examination. The first was that Mr Noble's comment was said to have been made after Mr Kazal had been sent SHFA's letter dated 29 August 2012 enclosing its Lease Expiry Policy which, as I noted above, he claimed not to have read. The second was that, when it was put to Mr Kazal that the statement attributed to Mr Noble was inconsistent with that letter, Mr Kazal responded (T64) that:
"...at no time Mr Noble said that, We are not going to give you the lease".
As SHFA points out, the pleaded representation, which was the subject of Mr Kazal's affidavit evidence, was not one by silence, but by a positive representation that a lease would be given, and Mr Kazal's evidence on cross-examination falls well short of such a representation. Mr Kazal then went on to comment (T64-65), variously, that:
"You know, if you think SHFA's right hand knows what the left hand is doing, it's unbelievable ... it is not my job to ask Mr Noble what he was telling me that it was inconsistent with his CEO's letter ... Well, it's not exactly the same message, but it's SHFA. You know everybody tells you different things."
125It is not surprising that Mr Carruthers, who appeared with Ms Anniwell for SHFA, pursued this matter further in Mr Kazal's cross-examination which continued as follows:
"Q. I see. And you don't know what to believe?
A. Exactly."
It is also not surprising that SHFA submits that this evidence is fatal to OXS's case as to reliance in respect of this and other alleged misrepresentations, so far as Mr Kazal says that he did not place reliance on (or, more precisely, did not know what to believe) of what SHFA told him. SHFA also points out that Mr Kazal, in his earlier letter dated 24 August 2010 to Mr Watkins (Ex P2, tab 6), was complaining about what he regarded as inconsistent messages received from SHFA. I ultimately give little weight to this evidence, which seems to me to be more a matter of Mr Kazal seeking to make a point as to his low opinion of SHFA than a genuine indication of his position as to the reliability of information provided by SHFA to OXS. Had I given greater weight to this evidence, it would have been very damaging to OXS's case. I accept Mr Noble's evidence as to this matter in preference to Mr Kazal's evidence and I do not accept that the pleaded representation was made.
126OXS also submits that this alleged representation was as to a future matter; that SHFA bears the onus of proving the representation was made reasonably at the time it was made and did not lead evidence going to this matter; and that OXS did not enter into negotiations for a new lease after the outdoor seating licence was obtained and ultimately issued a notice under s 44(1) of the Retail Leases Act. This issue does not arise since I have held that this representation was not established.
Causation and loss
127Paragraph 60 of the Statement of Claim pleads that:
"[OXS] relied on each of the Binding Lease Representation, First Provision of Registrable Lease Representation, Second Provision of Registrable Lease Registration, the Ministerial Decision Representation, the Further Ministerial Decision Representation, the New Lease Negotiation Representation and the New Lease Forthcoming Representation in:
(a) Taking steps to obtain an outdoor seating licence in relation to the Premises and incurring costs and expenses in doing so;
(b) Continuing to invest in the Premises and the restaurant and bar conducted from the Premises;
(c) Acting on the basis that it would be entitled to continue to lease and occupy the Premises until 30 June 2021;
(d) Not taking steps to search for alternative premises from which to conduct the restaurant and bar then conducted from the Premises;
(e) Not taking steps to sell the restaurant and bar business conducted at the Premises and/or assign the Current Lease to a third party;
(f) Not taking steps to commence urgent court proceedings against [SHFA] and/or [the Minister], including to injunct them or seek declarations as to the existence of a valid and enforceable lease in the terms of the Lease Agreement."
This pleading has the difficulty that all of the relevant actions are linked to all of the relevant representations, notwithstanding that some of the relevant actions were undertaken before the representations were made, or after statements had been made by SHFA that qualified the relevant representations. I will approach the matter on the basis that, first, only the "Ministerial Decision Representation" and the "Further Ministerial Decision Representation" have been shown to have been made and to be misleading or deceptive or likely to mislead and deceive and, second, it is necessary to have regard to when the particular steps on which OXS relies were taken.
128The first paragraph requires closer scrutiny of the timing of the relevant actions, to which I have referred in paragraphs 32 and 44ff above. The substantive work undertaken by OXS to pursue the development application and obtain an indoor seating licence was undertaken after the correspondence between SHFA and OXS in August 2012, which had made SHFA's position clear, although I accept that it had inaccurately described the Minister's role in contributing to that position. As I noted above, it does not seem to me that OXS relied on any misleading representation in this respect. Instead, it sought that approval because SHFA made clear it had no prospect of a renewal without doing so.
129The second paragraph appears to be partly founded on Mr's Kazal evidence that that OXS spent over $300,000 in 2010 upgrading the premises (Kazal 24.3.14 [14]). However, that conduct occurred prior to the relevant representations, and was not in reliance on or caused by any misleading or deceptive conduct in respect of subsequent communications. It could not be suggested, and OXS did not suggest, that a tenant who undertakes substantial expenditures late in its lease, presumably in the hope or expectation that its lease will be renewed, thereby obtains an entitlement to a lease renewal, absent any contractual entitlement to renewal or any conduct of the lessor which makes it unconscionable not to grant such a renewal. These expenditures were not undertaken on the faith of any representation by OHS that it would renew the relevant lease; to the contrary, OXS relied on them in its letter dated 24 August 2010, seeking to persuade SHFA to renew the lease.
130Mr Kazal's evidence is also that a total of about $14,038 had also been incurred with respect to the Premises after, and based upon, the representations as to the extension of the lease (Kazal 24.3.14 [28]). The amounts making up that figure relate to an amount of $3,000 payable to BBC Planning in respect of an application for development approval. I have referred above to the evidence as to when the substantive work on that application was done. The other amounts comprised of that charge relate to amounts payable to suppliers in respect of table tops and bases and in respect of ventilation (Ex P2, tab 14). Mr Kazal's evidence is that some (and implicitly, not all, of the expenditures of $14,038) were incurred in reliance on SHFA's agreement to a new 10 year lease for the Premises (Kazal 24.3.14 [28]). There is no other evidence of continued investment in the premises with the second paragraph, or of other steps within the third paragraph. I accept that there is a possibility that OXS may not have incurred that expenditure had it not been informed that it was the Minister's indication he would not give consent to the lease that caused the offer not to go forward, and OXS may have some prospect of establishing damages in this regard, at least on a loss of opportunity basis. I will refer to the principles applicable to such a claim below. It seems to me that there may be a real question as to whether a further hearing as to damages should be set down in respect of a claim of that size, particularly if it will be discounted as a loss of opportunity claim. If that claim is to proceed, it may be appropriate to refer it to a referee, although the cost to the parties of a referee may well exceed the amount of the claim.
131Mr Kazal's evidence is also that, as a result of the August 2011 Letter, OXS focused its energies on seeking to persuade the Minister to consent to a new lease and attempts to obtain an outdoor seating licence ceased to be a priority (Kazal 24.3.14 [32]-[33]). I have referred above to evidence that Mr Kazal did engage a third party to approach the Minister in that regard. I do not accept Mr Kazal's evidence that the August 2011 letter led to any change in OXS's approach to obtaining the outdoor seating licence. It had done little of substance to progress that matter before receipt of that letter and continued to do little of substance for a considerable time after that letter was received, not taking any steps of any real substance in that regard until August 2012.
132So far as the fourth and fifth paragraphs are concerned, Mr Kazal does not give evidence in respect of any search for alternate premises (and, implicitly, relocating the business) as distinct from, selling the business. Mr Kazal's evidence (Kazal 24.3.14 [47]) is that, if he had known in August 2011 that SHFA were "intent on not granting a new lease" beyond the term of the 2009 lease:
"I could have caused OXS in 2011 to sell the business conducted at the Premises, as OXS then still had 3 years remaining under the [2009 Lease]. OXS has now lost the opportunity to do so by being misled by SHFA as to the basis for refusing to continue with the grant of a new lease."
It does not seem to me the premise of that evidence is established, since nothing in the position taken by SHFA in August 2011 amounted to a concluded position that it was "intent on not granting a new lease" and would not, for example, negotiate a new lease in the year prior to expiry in 2014 in accordance with its Lease Expiry Policy, although in the event it has not done so. This evidence is also in somewhat qualified terms, and does not extend to evidence that Mr Kazal would have (as distinct from "could have") initiated a sale process. SHFA submits that Mr Kazal's evidence as to a sale of the business is inconsistent with his insistence that he believed he had an enforceable lease and that Minister Kelly had given consent and it seems to me that there is a substantial inconsistency in that regard. OXS's solicitors and Mr Kazal put the position that there was a concluded lease strongly in contemporaneous correspondence. Mr Kazal's evidence was that, from the time he sent the 28 February 2011 "acceptance" letter, he held the view that he had a binding agreement for lease, which he maintained through 2012 and to the present (T 43-45), and the later correspondence from SHFA taking a different position did not lead him to alter that view (T45).
133OXS's claim based on the loss of an opportunity to sell the business is in the nature of a loss of opportunity claim. Although the parties did not address the principles applicable to such a claim in submissions, I summarised the applicable principles in Re Colorado Products Pty Ltd (in prov liq) above at [464] as follows:
"... the authorities establish that a claimant in a loss of opportunity case must establish that loss and damage was caused by the alleged breach: Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 364 per Brennan J. Once causation is established, the fact that a claimed loss involves a degree of speculation does not necessarily exclude recovery for that loss: Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 643 per Deane, Gaudron and McHugh JJ; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; Sellars v Adelaide Petroleum NL above at 353 per Mason CJ, Dawson, Toohey and Gaudron JJ. The Court may also place a monetary value on a loss of opportunity in assessing equitable compensation, although that loss is incapable of precise measurement, and may use subjective "tools" in arriving at that value, such as common sense and general notions of justice and fairness, and may determine the amount of equitable compensation by a process of "judicial estimation" on the available indications: O'Halloran v RT Thomas & Family Pty Ltd above at 273; AMP Services Ltd v Manning [2006] FCA 256 at [69] per Finkelstein J.
134I do not accept (even to the level that would be necessary for a loss of opportunity case) that OXS would have sought to sell the business had it been told, in the August 2011 letter, that SHFA did not (at least at that time) support the grant of a new lease, rather than the Minister having indicated he would not consent to it. The history of OXS's dealings with SHFA indicated that OXS was ready to assert its position in respect of disputed issues (including the use of the courtyard and turnover rent payable in respect of other premises) and it seems to me that, had SHFA advised that it did not support the grant of a new lease at that time, OXS would have done then what it has done now, namely, to assert that it had a legally binding lease agreement arising out of the February 2011 letter and its purported acceptance of that letter; seek to intervene with the Minister to bring about the grant of a new lease; and then assert its claim by proceedings of the present character. It does not seem to me that OXS has established that the Ministerial Decision Representation or the Further Ministerial Decision Representation was causative of any loss that it has suffered.
135The sixth paragraph does not take matters further, since there is no suggestion, on the findings that I have made, that OXS's delay in commencing the proceedings has impacted on their outcome. The contractual case would have failed in any event and the misleading or deceptive conduct case would have led to a possible recovery, possibly on a loss of opportunity basis, of the modest expenses to which I have referred in paragraph 130 above. The unconscionability and estoppel cases would have failed, for the reasons noted below, irrespective of when the proceedings were commenced.
Claim in unconscionability
136By its Summons, OXS also sought a declaration that SHFA, in trade or commerce, had engaged in unconscionable conduct in connection with the supply or possible supply of goods or services to OXS in breach of s 22 of the Australian Consumer Law, in representing to OXS by the February letter that it was prepared to offer OXS a new 10 year lease commencing on 1 July 2011 on commercial terms at the prevailing market rate and later refusing to enter into such a lease and informing OXS of certain matters, after OXS had taken specified steps. OXS also sought an order that SHFA pay damages under s 236 of the Australian Consumer Law. In the further alternative, OXS claimed relief under s 62B of the Retail Leases Act in respect of unconscionability. Paragraph 62 of the Statement of Claim in turn pleads unconscionable conduct, in a somewhat summary way, as follows:
"By reason of the matters pleaded and particularised in paragraphs 13 to 61, above, [OXS] engaged in conduct, in trade and commerce, which was unconscionable in contravention of ss 20 and/or 22 of the Australian Consumer Law and/or s 62B of the Retail Leases Act."
That pleading relies on both ss 20 and 22 of the Australian Consumer Law.
137The parties did not address substantive submissions to the applicable legal principles in respect of this claim. Section 20 of the Australian Consumer Law prohibits a person, in trade or commerce, engaging in conduct that unconscionable within the meaning of the unwritten law from time to time. At general law, the Court may grant relief on the ground of "unconscionable conduct" where a party makes unconscientious use of their superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage: Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 at 462. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, the High Court held that unconscionability is not established merely because a party takes advantage of a superior bargaining position in its dealings with another party. Several later cases suggest that special disadvantage may need to be established in order to establish unconscionability under this section: Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCAFC 4; (2002) 117 FCR 301 at ][48]; AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2004] FCA 1330; (2004) 139 FCR 223 at [72]. The concept of special disadvantage can include at least a disadvantage which "seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to have known of the existence of that condition or circumstances and of its effect on the innocent party": Commercial Bank of Australia Ltd v Amadio above at 461; Credit Connect Pty Ltd v Carney [2010] NSWSC 910 at [48]. OXS did not identify any special disadvantage that arose in its dealings with SHFA, and it seems to me that those dealings were conducted at arm's length. It does not seem to me that the basis for the application of this section is established.
138OXS relies on the conduct pleaded in paragraphs 13 to 61 of its Statement of Claim to establish that SHFA's conduct was unconscionable. I have addressed the conduct pleaded in those paragraphs above. OXS submits that SHFA has taken advantage of its position as landlord against a tenant who had expended very significant sums in building up a business in premises that were approaching the end of its lease. However, more is required to establish unconscionability than that one party should have invested in a business situated in premises with a fixed term. That additional element might well have been established had the alleged representations that a new lease would be granted been established. In particular, OXS submits that the matters that show unconscionable behaviour by SHFA include, first, the making of misrepresentations as pleaded in the misleading or deceptive conduct. I have not held such misrepresentations were established other than in respect of the statements in respect of ministerial consent. OXS submits that the making of those representations was unconscionable in circumstances where OXS had improved the Premises since 1999 by an expenditure of in excess of $1.5 million and had a viable business which could have been sold, had it known that at the end of the term of the 2009 lease the business would be worthless. That matter does not arise so far as the representations were generally not established. I note, however, that there was no evidence of substance as to whether the business could have in fact been sold in 2011 had OXS then been informed (and, presumably, informed potential purchasers) that the Lease would expire in 2014.
139The next matter said to establish unconscionability is that:
"SHFA required OXS to spend time, energy and money in obtaining DA consent for the outdoor seating area, being a consent that would last well beyond the term of the existing lease, but in respect of which it never had an intention that OXS could derive the benefit. That amounted to SHFA obtaining a benefit which ran with the land while hiding the fact from OXS that it intended to go out to public tender and require OXS to vacate the Premises from 1 July 2014 (only about 6 months later).
It seems to me that this submission does not give adequate weight to matters of timing. As I have noted above, at the time of the February 2011 letter, SHFA (through Mr Watkins) was prepared to grant the relevant lease, and OXS might have obtained it had it acted promptly to meet the relevant conditions. It did not do so and, by the time that it did so, SHFA's approach had changed. It does not seem to me that SHFA's conduct in that regard amounts to unconscionability, particularly where it appears to have been prompted by a perception as to the desirability of open tender processes which was by no means unreasonable.
140Next, OXS submits that unconscionability is established by reason of the failure to negotiate an extension of the lease "as promised", especially in circumstances where there are many vacancies in The Rocks. The relevant promise was not established, for the reasons noted above. As I have held above, SHFA had indicated, in February 2011, that it was prepared to take a particular course, at a time that it was in fact prepared to take that course. It does not seem to me that, even if the course now taken by SHFA is ultimately commercially disadvantageous to it, by reason of vacancy rates in The Rocks, that assists OXS in establishing unconscionability that is not otherwise established.
141The concept of unconscionability under s 22 of the Australian Consumer Law is not limited to unconscionability at general law and the Court may have regard to the matters specified in that section in determining whether unconscionability is established, including inter alia, the relative strengths of the parties' bargaining power, whether contractual conditions were reasonably necessary, the parties' ability to understand the documents, the extent of any undue influence or pressure, and the extent to which the parties acted in good faith. The question whether conduct is unconscionable will be determined by reference to the ordinary meaning of the term, having regard to the factors specified in s [22], with those factors being considered as a whole and not treated as exhaustive: Australian Securities and Investments Commission v National Exchange Pty Ltd, [2005] FCAFC 226; (2005) 148 FCR 132. Section 62B of the Retail Lease Act specifies similar factors, with particular reference to the relationship between the lessor and the lessee. The concept of unconscionability under these sections will at least include conduct that involves "serious misconduct or something clearly unfair or unreasonable" or shows "no regard for conscience, or that are irreconcilable with what is right or reasonable" or involve "a high degree of moral obloquy": Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41-741 at [22]; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 at [96]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 at [184]; Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 at [121]; Australian Securities and Investments Commission v National Exchange above at [43]; Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17; (2009) 253 ALR 324 at [109]-[110], [113]-[115].
142I have addressed a number of factors on which OXS relies to establish unconscionability above in dealing with its claim under s 20 of the Australian Consumer Law. I accept that SHFA was, at least to some extent, in a position of advantage toward the end of the lease, because the question of a renewal of the lease was within its control, although that position would have been mitigated to some extent by the vacancies in The Rocks which OXS emphasised in submissions, and substantially by OXS's obvious sophistication in its dealings with SHFA and its access to legal advice. I do not consider that the conditions imposed by SHFA in respect of lease renewals generally were not reasonably necessary to protect its legitimate interests, given the ICAC Guidelines and the public interest in transparency in obtaining proving rights to occupy land owned by a statutory authority. I do not consider that SHFA's misdescription of the Minister's position in respect of the consent to the proposed new lease could be described as a "tactic", or rises to the level of "unfair tactics" in the relevant circumstances and I have held above that it was not unreasonable for SHFA, in 2011 and 2012, not to express a concluded position as to whether it would or would not renew the lease in the circumstances that would prevail in mid-2014. I also do not consider that OXS established that SHFA's conduct was unconscionable for the purposes of s 22 of the Australian Consumer Law or s 62B of the Retail Leases Act by reason of these matters and the matters noted above in respect of OXS's claim under s 20 of the Australian Consumer Law.
143OXS's claim that SHFA's conduct was unconscionable and in breach of ss 20 and 22 of the Australian Consumer Law and s 62B of the Retail Leases Act therefore does not succeed.
Estoppel
144Paragraph 63 of the Statement of Claim pleads estoppel in a somewhat summary way, as follows:
"By reason of the matters pleaded in paragraphs 13 to 62, above, and paragraph 64 below, [OXS] has relied on the misleading or deceptive representations and conduct of [SHFA] to its detriment such that it would be inequitable for [SHFA] to deny the existence of the Lease Agreement or to refuse to grant [OXS] a new lease of the Premises on the terms of the Lease Agreement and [SHFA] is estopped from doing so."
145The pleading seems to be put as a representational estoppel. The parties also did not address detailed submissions to the applicable legal principles in respect of this claim, probably appropriately where they are well established and where this claim overlaps, to a substantial extent, with the claim for misleading or deceptive conduct. In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, Brennan J observed (at 428) that, in order to establish an equitable estoppel, it was necessary for the plaintiff to prove, first, that:
"... the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship."
In Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, Deane J observed (at 444) that the law does not permit an unconscientious departure by one party:
"from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation."
In Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [42]ff, Pembroke J identified three key elements of a representational estoppel as being that the defendant's words or conduct must be clear and unambiguous; the plaintiff's conduct in relying to its detriment on those words or conduct must be reasonable; and the defendant must know or intend that the plaintiff will act or abstain from acting in reliance on those words or that conduct or, in effect, have some reasonable expectation that its words or conduct will induce some detrimental reliance by the plaintiff.
146This claim largely depends on the matters pleaded above and cannot succeed by reason of my findings above in respect of those matters. The only relevant representation that has been established is that the Minister had indicated that he would not consent to the grant of a new lease and, although I have held that representation was misleading, SHFA is not departing from that representation in not granting a new lease. The alleged representations that SHFA would grant a new lease, from which SHFA is departing, have not been established.
Section 68 of the Retail Leases Act
147I note, for completeness, that it is common ground that s 68 of the Retail Leases Act does not apply to these proceedings. That section provides that certain disputes may not be the subject of proceedings before any court unless and until the Registrar of Retail Tenancy Disputes has certified in writing that mediation under Pt 8 of the Retail Leases Act has failed to resolve the dispute or matter or the Court is otherwise satisfied that mediation under that Part is unlikely to resolve the dispute or matter. The Registrar of Retail Tenancy Disputes has certified in writing that mediation under Pt 8 of the Retail Leases Act has failed to resolve the dispute (Ex D1).
Administrative review claim
148Finally, and alternatively, OXS also sought relief under s 69 of the Supreme Court Act 1970 (NSW) and related relief in respect of an alleged decision of the Second Defendant, the Minister for Planning and Environment (as the relevant Minister is now known), to refuse to consent to the new lease of the Premises, as notified to OXS by the August 2011 letter. Paragraphs 17-19 of the relief claimed in OXS's Statement of Claim sought an order in the nature of certiorari quashing "the decision of the [Minister] to refuse to consent to the [l]ease"; an order in the nature of mandamus requiring the Minister to consider and determine whether to consent to the lease according to law; and/or a declaration that "the decision of the [Minister] to refuse consent to the [l]ease was contrary to law".
149Paragraph 27 of OXS's Statement of Claim in turn pleaded that SHFA's August 2011 ministerial briefing note did not ask the Minister to provide any consent in respect of any lease to OXS in relation to the Premises and paragraph 28 pleaded that the Minister noted the information in the memorandum and signed the memorandum. Paragraph 28 of SHFA's Defence admits the matters pleaded in paragraph 28 of the Statement of Claim and pleads that:
"The effect of the said notation and signature of the [Minister] on the August 2011 Memorandum was that the [Minister] did not provide consent to [SHFA] granting a new lease of the Premises to [OXS] and that the requirement in section 19 of the [SHFA] Act that a lease exceeding 5 years be entered into with the consent of the Minister was not satisfied."
Paragraph 65 of the Statement of Claim in turn pleaded that the Minister "made a decision to refuse consent", in the alternative to paragraphs 26-28 of the Statement of Claim, which were (as noted above) pleaded on the basis that no decision to refuse to consent was made by Minister Hazzard, and SHFA's advice that such a decision was made was misleading or deceptive. I have held, in respect of that claim, that no such decision was made and the claim for administrative relief premised on the making of that decision must fail.
150I should nonetheless refer to the helpful submissions made by Mr Free, who appeared for the Minister, in respect of this claim. Mr Free pointed out, correctly, that the August 2011 ministerial briefing note (Ex P6) and the Minister's Statement of Reasons (Ex P7) (which was subject to a limiting order under s 136 of the Evidence Act) makes clear that SHFA did not then place a proposal before Minister Hazzard that it grant a lease or take any other action which required ministerial consent under 19(3) of the SHFA Act. He points out that all that note did was to inform the Minister that SHFA was now proposing to withdraw "offers" made in respect of, inter alia, the Premises, since it had formed the view that it would not be appropriate to proceed with the negotiations based on those "offers" as it would be contrary to the SHFA Lease Expiry Policy and the ICAC Guidelines. As I noted above, the ministerial briefing memorandum was described as being for the Minister's information, not for his decision.
151Perhaps more fundamentally, as Mr Free points out, s 19(3) of the SHFA Act did not require the Minister's consent to withdraw offers to renew leases, since the requirement to consent was directed to granting (as distinct from not granting) an interest in the land. It seems to me that that submission is plainly correct. There was no occasion for the Minister to make any decision as to matter that did not require his consent and as to which his consent was not sought. As Mr Free points out, the claim for mandamus made by OXS must fail at least on that basis, since there was no duty on the Minister to decide whether or not to grant a consent to a lease, where such consent was not sought and was not required. Any claim for certiorari must also fail since no decision was made by the Minister that had any legal effect and is amenable to being quashed: Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 580.
152In closing submissions, OXS accepted that it is apparent from the Minister's Defence and his Statement of Reasons that he made no relevant decision, although it pointed out that SHFA maintained a non-admission as to that matter in its Defence. OXS also accepted that the Court would likely find that no decision was made by the Minister and so no relief is required under s 69 of the Supreme Court Act 1970. Mr Free went somewhat further, submitting that there was no proper factual foundation for OXS's alternative case based on the making of a decision by Minister Hazzard and that:
"Neither [OXS], nor any other party, contends that Minister Hazzard in fact made a decision "to refuse consent to the Lease". The character of what occurred in August 2011 is readily apparent from the Ministerial briefing note [Ex P6] and the Minister's statement of reasons [Ex P7]. Senior Counsel [for OXS] fairly described the Ministerial process in his opening address. SHFA did not ask the Minister to consent to any lease, or to make any relevant decision. The Minister was not called upon to make, and did not make, a decision under s. 19 of the [SHFA Act] ....The factual predicate of the relief sought is not established."
That submission was, with respect, also correct, at least so far as matters had developed by the time of the hearing. It was surprising that OXS pressed this case, even in the alternative, where no-one was seeking to support its (incorrect) premise. A complex hearing could have been simplified had that case simply been abandoned when its premise became untenable.
153OXS also initially raised, but I do not understand to have pressed, an allegation that it was deprived of procedural fairness in respect of the Minister's decision. Had that claim been pressed, it must have failed, since it does not seem to me that any interest of OXS was affected by the Minister's doing no more than noting the information provided to him by SHFA so as to attract any obligation to afford procedural fairness to OXS. OXS also pleaded that the Minister failed to take into account several relevant considerations in making the relevant decision, and that any decision by the Minister to refuse consent to the lease was "unreasonable and lacking in any evident and intelligible justification". These claims must fail because the Minster was not required to make, and did not make, the relevant decision. I should add that I would not have accepted the submission that, had the Minister made the relevant decision to refuse consent to a new lease to OXS, it would have either sufficiently unreasonable or lacking in intelligible justification to support a claim for administrative review. As Mr Free pointed out in submissions:
"The Minister was advised in the briefing note that the offers for lease in respect of 135 George Street were contrary to SHFA's own policy as well as the ICAC guidelines on direct dealing. The Minister was further advised that SHFA itself thought it appropriate to withdraw the offers. In the circumstances, there was nothing unreasonable in the ordinary sense, let alone in the special sense, about the Minister concluding that consent should be refused for such a lease (on the premise that this was the effect of the process)."
Orders and costs
154The result of this judgment is that the large part of OXS's claim against SHFA fails. I will hear the parties as to whether any remaining claim as to damages in respect of expenditures in the order of $14,000 referable to the Ministerial Decision Representation or the Further Ministerial Decision Representation should be referred to a referee. SHFA has requested an opportunity to be heard further as to costs following the delivery of judgment and I will afford it that opportunity.
155OXS's claims for relief against the Minister should be dismissed. The Minister seeks an order that OXS pay the Minister's costs. The Minister points out, and I accept, that OXS has been on notice as to the character of the alleged "decision" of the Minister in August 2011 since at least the service of the Minister's Statement of Reasons (filed on 20 March 2014) and the Minister's Response to the Summons (also filed on 20 March 2014). The Minister points out that (as I noted above) OXS embraced the Minister's characterisation of what occurred in paragraphs 26-28 of the Statement of Claim, while at the same time maintaining an alternative case to the contrary.
156OXS submits that SHFA should pay the Minister's costs of the proceedings since it was "wholly responsible" for the Minister's participation in the proceedings, because the Minister's Defence and Statement of Reasons had only emerged after the commencement of the proceedings and SHFA had not admitted OXS's pleading that no decision was made by the Minister. I do not accept that submission. OXS, not SHFA, joined the Minister as party to the proceedings; the Minister's position and its basis was apparent for several months prior to the trial; and OXS pursued its alternative case to trial after the relevant facts had emerged and pursued that case at the trial although no-one, including OXS, sought to establish its basis. That case was not required by SHFA's non-admission of OXS's pleading that no decision was made, since OXS could have discontinued its case against the Minister after the absence of a basis for it emerged and simply relied on the ministerial briefing note to establish that the Minister made no relevant decision. Although it is not necessary to my decision as to costs as between OXS and the Minister, I would add SHFA's non-admission does not seem to me to have been unreasonable, so far as it was seeking to preserve a case (which was properly open to it, although it has not succeeded) that the Minister's involvement in the briefing note supported the advice given in the August 2011 Letter. That is a matter that may be relevant to the position as to costs between OXS and SHFA, but does not seem to me to support an order that SHFA pay the Minister's costs of an unsuccessful claim by OXS against the Minister as to which it had no substantive involvement.
157I therefore make the following orders:
1 The Plaintiff's claim against the Second Defendant is dismissed.
2 The Plaintiff pay the Second Defendant's costs of the proceedings as agreed or as assessed.
I will, as noted above, hear the parties further as to the next steps to be taken in the proceedings as between OXS and SHFA and as to the costs of those proceedings.