Pace v Pratelli

NCAT Appeal Panel|2021-09-22|Before: Blake AM

Background

The respondent, Rose Marie Pratelli, is the owner of residential premises in Croydon Park, Sydney (the Premises) in which the appellants, Daniel Pace (Mr Pace) and Santina Pace (Mrs Pace), as tenants resided under a Residential Tenancy Agreement (the Agreement) for an initial fixed 12 month term commencing on 1 April 2019. At the end of the first fixed term, there was a second fixed 12 month term agreed between the parties, with the Agreement ending on 31 March 2021.
In February 2021, there were discussions between the parties about the signing of a further (third) fixed term commencing on 1 April 2021.
A Notice of Termination dated 12 March 2021 was served by the respondent on the appellants (First Notice of Termination). The specified date for possession was 11 April 2021.
Also on 12 March 2021, the respondent entered in a contract for the sale of the Premises with a completion date of 12 July 2021.
A further Notice of Termination dated 16 April 2021 was served on the appellants, with a date for possession of 30 June 2021 (Second Notice of Termination).
On 19 July 2021, the Tribunal terminated the Agreement and ordered possession to be given to the respondent forthwith, such order being suspended until 26 July 2021.

The First Proceedings

By an Application lodged by the respondent in the Consumer and Commercial Division on 27 April 2021 (Proceedings RT 21/18275), the respondent sought a termination order in respect of the Agreement pursuant to section 86 of the Residential Tenancies Act 2010 (NSW) (RT Act). The application was heard on 15 June 2021. By its decision dated 16 June 2021 (the First Decision), the Tribunal made certain findings and orders, including the following: 1. the evidence established that the fixed term agreement came to an end on 31 March 2021; 2. there was no further fixed term agreement entered into by the parties operating from 1 April 2021; 3. there were extensive emails passing between the parties in relation to a possible future lease agreement but there was never any concluded agreement; 4. the two Notices of Termination were valid notices. Neither of the dates for possession in the Notices of Termination contravened s 86(3) of the RT Act. The Second Notice of Termination effectively revoked the First Notice of Termination and s 118 of the RT Act permitted the respondent to issue a second notice on the same grounds as the first notice; 5. however, by relying upon the Second Notice of Termination rather than the First Notice of Termination, the Tribunal held that it did not have jurisdiction to make the order for possession for the date specified in the second notice because the date for possession had not yet expired: see s 86(4)(b) of the RT Act.
Neither party sought to challenge the Tribunal's decision dated 16 June 2021 nor any of the findings made by the Tribunal in the First Decision.

The Second Proceedings

When the date for possession in the Second Notice of Termination had expired, the respondent again sought orders for possession from the Tribunal by lodging a second Application on 1 July 2021 (Proceedings RT 21/18275), which came before the same Member for hearing on 19 July 2021.
By its decision dated 19 July 2021 (the Second Decision), which is the decision that is the subject of the present appeal, the Tribunal terminated the Agreement and suspended the order for possession until 26 July 2021. A daily occupation fee of $157.14 per day was ordered to be payable from the day after the date of termination, namely 17 July 2021 until the date that possession was given to the respondent.
The Tribunal stated that the issues raised by the appellants were the same issues that were the subject of findings in the First Decision, the relevant difference being that the second Application complied with the requirements of s 86 of the RT Act.
The Tribunal set out in its decision the findings made in the First Decision, including the reasons for finding that was no further 12 month fixed term agreement that had been entered or that was operative after 1 April 2021. The only new evidence in the Second Proceedings comprised some photographs and an email from Mr Pace dated 13 March 2021 in support of the following submissions by the appellants: 1. photographs to prove that the tenants provided access to the landlord for the purpose of undertaking repairs on the proviso that a new lease would be entered into; 2. in response to being informed of the sale of the Premises, Mr Pace immediately responded in an email dated 13 March 2021 in words to the effect: "As our intention is to move as soon as possible, at the end of our lease [ie on 31 March 2021] the landlord can do as they please." 1. Mr Pace then almost immediately forwarded an email to the respondent's agent stating: "I also agree to the terms regarding extension of the lease until the settlement date, currently 12 July 2021. I also agreed to provide 7 days notice shall we choose to vacate the property prior to the settlement date."
The respondent contended that the First Decision constituted an issue estoppel. The Tribunal found that the First Decision turned on the premature commencement of the proceedings by the respondent before the time for compliance with the Notice of Termination had expired, such that there was no issue estoppel in the previous findings that there was no agreement for a further 12 month fixed term commencing on 1 April 2021. The respondent has not challenged that finding in this appeal.
In the Second Decision, the Tribunal observed at [25]: "25 There is now an inconsistency in the tenant's argument concerning the purported new 12 month agreement. The tenants now submit that they had a four month fixed term tenancy ending on the date of the property settlement. There was never an offer of a four-month extensive agreement. The landlord put the tenants on notice that they could stay if they wish, after the end of the fixed term until completion the contract of sale, which was expected to occur on the 12-July-2021"
The Tribunal concluded at [32]-[34]: "32. Having reconsidered the evidence led in the previous proceedings and having considered the additional material I am not satisfied on the evidence before me on the 16 July 2021 that there was a 12 month fixed term tenancy, or a 4 month fixed term tenancy. 33. There were discussions and emails passing between the parties concerning a new lease. There was never a meeting of the minds in relation to the terms of any proposed new lease. It is clear to me the landlord was intending to sell the property, and the tenants were aware of this, as there is a reference the landlord keeping the tenants informed in relation to offers from prospective purchasers … 34. What did occur is that when the landlord offered the tenants a six-month agreement in an email dated 18 February 2021, the tenants rejected that offer. They said they would remain on a periodic lease if the landlord did not accept a 12 month lease term. And then in the email on the 13 March 2021, Mrs Pace says their intention was to move as soon as possible and thereafter the landlord could do as she pleases at the end of the lease. This email was sent some 18 days before the expiration of the fixed term. I do not accept Mr Laycock's submission that in Mrs Pace [sic] mind she thought there would be a new lease. To the contrary she informed the landlord initially that they would remain at the premises on a periodic agreement. They subsequently served a notice of termination informing the landlord in writing they would be vacating at the end of the fixed term. This notice is in writing and complies with s 96 (2) of the Act, which states the tenant is to give the landlord not less than 14 days notice of intention to vacate at the end of the fixed term."

Grounds of appeal

The Notice of Appeal was lodged on 23 July 2021. The appellants challenged the Tribunal's orders terminating the Agreement and the primary finding by the Tribunal that there was no fixed term lease that entitled them to possession of the premises until 31 March 2022.
Several grounds of appeal were raised in the Notice of Appeal. Each of them was expressed at a high level of generality and in large part, each of them was concerned with the same issue, namely whether there was a fixed term lease agreed between the parties at some (unspecified) time but obviously prior to the respondent issuing the Second Notice of Termination. Although the appellants also raised issues in the Notice of Appeal in relation to the current public health orders relating to the COVID - 19 pandemic, that issue was not pressed on the appeal.
The appellants accepted that leave to appeal was necessary from the decision of the Tribunal from the Consumer and Commercial Division.
The appellants contended that the Tribunal's decision was not fair and equitable because the Tribunal failed to take into account the evidence relied upon by them that established a 12 month fixed term lease. The Notice of Appeal contended that the Tribunal failed to attribute appropriate weight to the "voluminous material tendered to establish the existence of the fixed term lease".
The appellants also contended that the decision of the Tribunal failed to take into account the evidence "establishing the existence of a 12 month fixed term lease which was not disputed by the landlord."
The appellants' evidence was lodged with the Tribunal on 19 August 2021. That evidence comprised the documents previously relied upon by the appellants at the hearing before the Tribunal on 16 July 2021, together with a copy of the audio file from the hearing that had not been transcribed (although some transcript of the "relevant parts" from the audio file were provided).
The appellants' written submissions were also lodged with the Tribunal on 19 August 2021. Although the Notice of Appeal did not specify the date on which the 12 month fixed term lease was said to have been agreed between the parties, in the written submissions, the appellants submitted that there was an immediately binding contract comprising a fixed term lease entered into and commencing on 17 February 2021.
The Notice of Appeal, the appellants' written submissions and the oral submissions presented at the hearing of the appeal all focussed on the issue of whether there was a 12 month fixed term lease agreed between the parties before the second Notice of Termination was issued by the respondent.
If there was, and subject to leave to appeal being granted, then the Second Notice of Termination was invalid and the Tribunal's orders must be set aside.

Reply to appeal

The respondent's Reply to Appeal dated 5 August 2021 provided a single word denial to each of the grounds of appeal. The respondent accepted that leave to appeal was required, and stated that leave should be refused on the grounds that the appellants had not suffered any substantial miscarriage of justice.
The respondent lodged its evidence and written submissions dated 8 September 2021 with the Tribunal on 9 September 2021. The evidence included a full transcript of the hearing before the Tribunal on 16 July 2021, the Application filed by the respondent in the Tribunal in the First Proceedings and the evidence relied upon by the respondent at the hearing before the Tribunal on 16 July 2021. The respondent's written submissions responded to each of the separate grounds of appeal in the Notice of Appeal, but as in the case of most of the grounds of appeal, in each case, the issue primarily remained the same, namely whether there was a legally binding agreement entered into between the parties for a further 12 month fixed term lease.
The respondent particularly relied upon two communications from Mrs Pace to the respondent's real estate agent, namely: 1. an email dated 18 February 2021 which stated: "... if the landlord does not agree to a standard 12 month lease etc, all good, we will remain periodically. … " 1. an email dated 12 March 2021 which stated: "… without that 12 month lease there has been multiple breaches to our existing lease agreement … As our intention is to move as soon as possible… At the end of our lease the landlord can do as they please …"

Further submissions from the parties

On 19 August 2021, the Appeal Panel had granted Mr Chris Laycock (Mr Laycock) leave to appear on behalf of the appellants at the appeal. Mr Laycock had also appeared on behalf of the appellants before the Tribunal, where he was described as the "stepfather-in-law" of Mrs Pace.
On 29 July 2021, the Appeal Panel had granted the respondent leave to be legally represented at the appeal. Ms Vanessa Wang appeared at the appeal and also before the Tribunal on behalf of the respondent.
At the hearing of the appeal and during the course of the appellants' oral submissions when presenting the evidence relied upon, it became apparent to us that in the alternative to the agreement being made on 17 February 2021 as contended by the appellants, there was some uncertainty about the relevant point in time that an agreement may have come into fruition based on certain other evidence that was before us. That other evidence suggested the possibility that there may be an alternative date of 25 February 2021 at which time an agreement may have been came into effect but in respect of which neither party had made submissions either before the Tribunal or in the appeal.
Accordingly, we invited the parties to provide any further written submissions directed to the issue of whether (if at all) a binding residential tenancy agreement was made on 17 February 2021 or 25 February 2021, including whether the terms of any such agreement were sufficiently certain when it was made. Having regard to the way in which this issue arose at the hearing and since this was a matter not raised before the Tribunal below, the respondent was also asked to identify whether she sought to adduce fresh evidence to deal with that issue and whether any application to do so could be determined "on the papers".
The respondent served her submissions on 15 October 2021. The respondent correctly submitted that prior to the hearing of the appeal, the appellants had not contended that there was any agreement constituting a binding residential tenancy agreement made on 25 February 2021. To meet that new contention, the respondent stated in her written submissions that the evidence of the agent, Mr Vella would be relevant and in particular documents regarding his telephone communications with the parties between 19 and 25 February 2021. The respondent said that a summons would be issued to Mr Vella to attend to give evidence and produce such documents if the application to adduce fresh evidence was allowed. The respondent accepted that we could determine her application to present fresh evidence "on the papers".
The appellants served submissions in reply on 29 October 2021. For present purposes, it is sufficient to note that the appellants objected to any fresh evidence being adduced by the respondent, including on the basis that Mr Vella gave evidence in the First Proceedings and evidence from him was reasonably available at the Second Proceedings. The respondent also stated that an application by the appellants to issue a summons to Mr Vella to appear and give evidence at the appeal was opposed by the respondent and refused by the Appeal Panel on 17 August 2021.
We deal with the detail of the parties' further submissions later in these reasons. For the reasons given below, we do not consider it necessary to consider the application for the respondent to adduce any fresh evidence on the issue of whether a binding agreement may have come into effect on 25 February 2021 (or any other date).

Statutory basis of the appeal: leave to appeal

Internal appeals from a decision of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).
The appellants have not sought to raise or identify a question of law in the appeal. Both parties accept that leave to appeal is required.
In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [84(2)] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: "(a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed."
In the case of leave to appeal from of a decision of the Consumer and Commercial Division, as in this case, the Appeal Panel's discretion to grant leave is also governed and limited by cl 12 (1) of Sch 4 of the NCAT Act, which (relevantly) provides: 12 Limitations on internal appeals against Division decisions An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). …
In Collins v Urban the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Sch 4 of the NCAT Act may have been suffered where: "76 … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance."
Having regard to the above principles and the fact that the only real issue for determination in this appeal is whether there was a legally binding and enforceable agreement for the lease of the Premises for a further fixed term of 12 months some time prior to the issuing of the Second Notice of Termination, for the reasons that follow, we are not satisfied that there was any relevant error made by the Tribunal or that the appellants have suffered a substantial miscarriage of justice to warrant the granting of leave to appeal.
We have therefore decided to refuse the appellants leave to appeal.

Was there a binding agreement made on 17 February 2021?

In the appellants' further written submissions, the appellants submitted at [1]: "The tenants submit that an oral agreement was made on the 17th February 2021 for a binding fixed term residential tenancy agreement."
In our view, the Tribunal was correct in finding that there was no agreement for a 12 month fixed term tenancy reached between the parties on 17 February 2021. We accept the accuracy of the following statement made by the Tribunal in its reasons at [33]: "33. There were discussions and emails passing between the parties concerning a new lease. There was never a meeting of the minds in relation the terms of any proposed new lease. It is clear to me the landlord was intending to sell the property, and the tenants were aware of this, as there is a reference to the landlord keeping the tenants informed in relation to offers from prospective purchasers. …"
The evidence relied upon by the appellants includes a file note of an alleged telephone conversation on 17 February 2021 between Mr Pace and Mr Vecchio, who is the husband of the respondent. That file note records Mr Vecchio agreeing and promising "a new 12 month lease, same terms, no conditions, dates 1/4/21 to 1/4/22."
We accept the correctness of the respondent's further written submission that Mr Vecchio does not have the legal authority to bind the landlord (Ms Pratelli) to a residential tenancy agreement. In any event, Mr Vella, the respondent's agent, sent a text message to Mrs Pace on 17 February 2021 with an offer of a "12 month lease with a five month termination clause unless there is less than 3 months before the end of the lease". Significantly, the offer was rejected in an email from Mrs Pace to Mr Vella on the same date, which stated: "... we have decided to decline your offer to sign a new lease as the reduced term is not suitable for our needs. We'll continue with our current periodic arrangement."
On 18 February 2021, Mr Vella informed the respondent that a six month termination clause could be offered. Mrs Pace then rejected that on the basis "the final and only thing we will agree to is a standard 12 month lease agreement …". Later that same day, Mrs Pace sent Mr Vella a further email stating: "... just wanted to rectify one thing that was said in my previous email; if the landlord does not agree to a standard 12 month lease et cetera, all good, we will remain periodically."
The case advanced by the appellants before the Tribunal and at the outset of this appeal, consistent with the appellants' written submissions lodged on 19 August 2021, was that "there was an immediately binding 'contract', fixed term lease, commencing on the 17th February 2021 between the parties." We are not satisfied that as at 17 February 2021 the parties had agreed to a further 12 month fixed term either from that date or from the end of the existing Agreement from 1 April 2021 and ending on 1 April 2021.
The content of the written exchanges between the parties on 17 and 18 February 2021 do not support the appellants' case that a further agreement for another fixed term had been entered into on or about that date. Further, the conduct of the parties, and in particular the appellants, after that time is inconsistent with the contention that there was an agreement between the parties on or about 17 February 2021. Such conduct is evidenced, for example in the next offer to the appellants made on behalf the respondent on 19 February 2021 for a six-month fixed term agreement which was rejected by them as "not enough for us and we have decided to stay on periodically".
Also, in an email on 22 February 2021, Mrs Pace informed the agent that "before we agree to sign the 12 month lease with no clause we ask that the urgent matters of ensuite tap and side gate be prioritised before anything else [ie other repair works]. Can the owner confirm and agree to this?"
Presumably, although it is not certain, the reference to "no clause" is a reference to the previous negotiations with respect to an early termination clause. There is no evidence that the respondent or her agent accepted the condition with respect to her undertaking the specified urgent matters before the appellants would sign the 12 month lease. However, the appellants submitted that since some works were undertaken on the Premises, the inference must be that a 12 month lease had been agreed. Against that submission is the fact that the only response to that email was by the agent that stated: "You and the owner do not seem to be getting along. I would suggest you find alternative premise."
We are satisfied that there was no agreement reached between the parties on or about 17 February 2021 for a further occupancy of the Premises by the appellants and that the only terms by which they remained in occupancy was pursuant to the signed Agreement between the parties that had commenced on 1 April 2020 and was due to end on 31 March 2021. The evidence of the internal file note of 17 February 2021 relied upon by the appellants cannot be accepted as recording a final and binding agreement when all of the evidence proximate to the date is properly considered.

Was there a binding agreement made on 25 February 2021?

Similar to the appellants' submission to which reference has been made above in relation to the purported agreement made on 17 February 2021, the appellants also submitted in the further submissions at [11]: "The tenants submit that an agreement was made on the 25th of February 2021 for a binding fixed term residential agreement."
The appellants did not advance the date of 25 February 2021 as an alternative date to 17 February 2021. Rather it was put as either an additional and further date on which a binding agreement was said to have come into effect, or that during the period 17 and 25 February 2021 a fixed term lease agreement was made: [14].
The evidence in support of the appellants' submission relating to 25 February 2021 is a text on that date from the agent informing Mrs Pace that he could not issue the lease to her "by Monday [1 March] as we have staff down at the moment but I can get it to you on Wednesday [3 March] okay".
We accept the submission made by the respondent that prior to the hearing of the appeal on 1 October 2021, the appellants had never contended that an agreement for a binding residential tenancy agreement had been made on 25 February 2021 by virtue of the text message sent by Mr Vella to Mrs Pace that day or for any other reason.
The Tribunal considered the text message of 25 February 2020 in its Reasons. The Tribunal noted that the text from Mrs Pace to the agent on that date had requested that a lease be entered into before access was granted for the respondent to undertake any of the internal works to the Premises. As we have stated above, the appellants submitted that since some works were undertaken on the Premises, the inference must be that a 12 month lease had been agreed. We do not accept that submission particularly in circumstances where on 3 March 2021 (being the Wednesday referred to in the agent's text of 25 February 2021), Mrs Pace sent a text message to the agent asking if the respondent was still happy to give a 12 month lease.
Such a communication is quiet inconsistent with the proposition that an agreement for a 12 month lease had already being concluded and was only awaiting the signing of the formal document.
The lease remained unsigned. The response from the agent to the appellants on 3 March 2021 was that he was unable to get a reply from the landlord as to whether he was still willing to give a 12 month lease.
On 4 March 2021 Mrs Pace inquired of the agent if he had heard from the respondent stating: "... we need to know if it's a yes or no and if yes then wonderful, we can sign a lease asap. …"
On 12 March 2021, Mrs Pace sent an email to the agent refusing access for a valuation stating: " … We are not allowing access … We have been more than reasonable and accommodating during our lease, giving unrestricted access to the property … Consent [to access the property to undertake work] was only given under the proviso that we would be granted a 12 month lease upon the completion of the cosmetic work conducted on the property. Therefore, without the 12 month lease, there has been multiple breaches of our existing lease agreement … As our intention is to move as soon as possible … At the end of our lease, the landlord can do as they please. …"
That written communication confirms: 1. any agreement for a 12 month lease was conditional; 2. no further 12 month lease had been agreed or signed; 3. the existing lease agreement remained on foot; 4. the appellants no longer sought a new lease as they intended to move out of the premises as soon as possible at the end of their existing lease.

Principles of law relevant to contract formation

The question of whether parties have reached a binding contract is to be determined objectively and is a question of fact.
As McHugh JA stated in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 (at 11,117): "[I]n an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties."
In circumstances where the parties contemplated entry into a formal contract such as a lease in the present case, the approach to the issue is to be considered in light of the analysis of the High Court in Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 (Masters v Cameron) in which the Court said (at 360): "Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
As the Court explained, in the first two classes of case, there is a binding contract. In the third, there is not. It is now often said that to the three classes identified by the High Court a fourth should be added - that is, where the parties agreed (objectively) to be bound immediately and exclusively by the terms they had agreed whilst expecting to make a further contract in substitution for the first contract containing additional terms: see Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 per McLelland J (affirmed on appeal 40 NSWLR 631).
The evidence to which we have referred above suggests the third category is more pertinent to the facts of this case. There was no concluded bargain. While it was the fact that the parties were in negotiations with respect to the terms of a new lease and the agent told the appellants that a lease was to be made available for signing on 3 March 2021, we are not satisfied that the parties had reached any final agreement particularly in this case where the lease remained unsigned.
The evidence to which we have referred above does not support a finding that the parties had reached a final agreement or that either of them felt bound by any agreement said to have been made on either 17 or 25 February 2021. As late as 12 March 2021, the appellants had reaffirmed a reliance on the existing lease and an intention to vacate when the term of that existing lease expired. Consistent with that assertion, the respondent served the First Notice of Termination. This position was reaffirmed by Mr Pace in his email of 13 March 2021 when he stated in response to being informed of the sale of the Premises: "... our intention is to move as soon as possible, at the end of our lease."
Mrs Pace agreed with the position taken by her husband in a separate email to the agent only a few minutes after her husband's email was sent. Mrs Pace stated: "I also agree to the terms regarding the extension of the lease until settlement date"
In the context of those communications, we do not accept Mr Laycock's submission that such communications evidence the making of a new agreement. Rather, in our opinion, it instead establishes the continuation of the existing agreement and a holding-over by the tenant after the existing lease expired on 31 March 2021 until sometime prior to or on completion of the sale on 12 July 2021.
None of those communications exchanged between the parties could be construed as consistent with an objective intention to have entered into a new lease for a further fixed term of 12 months at any time. The "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (Masters v Cameron per Dixon CJ, McTiernan and Kitto JJ at 362).
This so-called "objective theory of contract" underpins the law relating to the formation, construction and interpretation of contracts: eg Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 per Allsop P at [4].
In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65, Campbell JA (Mason P agreeing) said at [262] that, for the purpose of deciding whether parties have made a concluded and binding agreement, the 'objective intention' of the parties which the court seeks to ascertain is 'the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties have of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract.
It is well established that a court may take into account the dealings and communications between the parties after, as well as before, the formation of an alleged concluded and binding agreement, for the purpose of determining, objectively, whether they intended to form such an agreement.
In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8, Gaudron, McHugh, Hayne and Callinan JJ at [24]-[25] stated that the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances may be taken into account in determining whether a completed and binding agreement has been made.
In ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, Gleeson CJ held (at 547-548) that whether a completed and binding agreement has been made involves an objective determination of the intention of the parties from a consideration of the communications exchanged by them in the context of their dealings over a period of time. In relation to the admissibility of other extrinsic evidence, his Honour said (at 550): "The position is by no means so clear, however, in connection with internal memoranda, communications by one or other of the parties with some third party, or statements as to subjective intention made by individuals in the course of giving evidence."
In this respect it would seem that the weight to be afforded to internal memoranda such as the appellants' file note of 17 February 2021 is of less relevance and persuasive value than records of communications exchanged between the parties. In the case of third party communications which might usually said be said to be of less relevance from an objective view, that is probably not the case where an agent such as Mr Vella is acting in the negotiations on behalf of one of the parties. And in relation to the cross examination of Mr Vella relied upon by the appellants in the further submissions to adduce evidence of his subjective intentions and beliefs, that also needs to be carefully assessed against extrinsic evidence of greater probative value such as the text and email exchanges between the parties and the respondent's agent. We have therefore placed particular reliance on the evidence contained in the communications passing between the parties and the respondent's agent as providing the best evidence of the objective intentions of the parties at all material times. Those exchanges traversed the period after both 17 and 25 February 2021.
In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Heydon JA held at [25]: "... post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011] at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255."
As Giles JA (Hodgson and Campbell JJA agreeing) observed in Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [105]: "I respectfully suggest that subsequent communications are not simply aids to interpretation, or a source of information as to matters with which a concluded contract should deal. Their probative value may be more direct. To repeat, the objective intention of the parties is fact-based, and found in all the circumstances. That in their subsequent communications the parties have continued in negotiations, or have expressed the common understanding that they are not legally bound unless and until a formal contract is executed, is of itself probative as to their contractual intention: see Howard Smith and Co Ltd v Varawa [1907] HCA 38; [1907] HCA 38; (1907) 5 CLR 68], stating simply that any statements or conduct inconsistent with the existence of a concluded contract are relevant."

Conclusion

As in this case, an assessment of subsequent conduct by parties usually arises where parties have reached a preliminary or conditional agreement and the question then arises whether a final agreement was intended to be binding immediately, irrespective of the execution of a formal document.
We are satisfied that having regard to principles discussed in the authorities to which we have referred above, when the conduct of the parties both after 17 and 25 February 2021 is objectively considered, such conduct primarily comprising communications between the parties and the respondent's agent, is not consistent with the appellants' contention that the parties had intended or understood there to have been a final and binding agreement reached between them at any time prior to the service of the First or Second Notice of Termination.
As at 12 March 2021, the date when the First Notice of Termination was served, the appellants had affirmed in an email that the existing lease remained on foot, alleged that the respondent had breached its terms and expressed an intention to vacate the premises at the expiry of the existing lease on 31 March 2021. That position was re-affirmed by Mr Pace on 13 March 2021 within only a few minutes of being informed that the Premises had been sold and in which he expressed the appellants' "intention ... to move as soon as possible". Mrs Pace agreed with the position taken by her husband in a separate email to the agent only a few minutes after her husband's email was sent.
That conduct and those circumstances satisfy us that objectively speaking, the parties had not intended to create a final and binding agreement for a further fixed term at any time. This is not a case where the preliminary agreement was subject to or awaiting the execution of a formal document. Rather, in this case, we are of the view that it is most likely that the lease remained unsigned because there had not been any agreement of any kind made between the parties for a further lease.

Disposition of the appeal

For the reasons discussed above, we are not satisfied that there was an error in the findings of fact made by the Tribunal or that in reaching its findings, the Tribunal failed to have sufficient regard or give appropriate weight to the evidence adduced by the appellants.
The appellants have not demonstrated that the Tribunal's reasons upholding the validity of the Second Notice of Termination and making the order for possession were affected by error and that there may have been a substantial miscarriage of justice to warrant the granting of leave to appeal.
We therefore refuse leave to appeal.

Costs

We do not propose to make any order with respect to the costs of the appeal but will make provision in our orders for the respondent to seek her costs if she wishes to make any such an application.

Orders

We make the following orders: 1. Leave to appeal refused. 2. There is no order as to the costs of the appeal. 3. If the respondent seeks a different costs order to order (2) above, then the following orders will apply: 1. within 14 days of the publication of these reasons, the respondent is to file and serve any submissions and evidence addressing any "special circumstances" in support of an application for her costs under s 60 of the NCAT Act and to also address whether a hearing on the question of costs may be dispensed with and have the matter determined "on the papers"; 2. the appellants are to file and serve any submissions and evidence in response within 14 days of receipt of the respondent's submissions and evidence and address whether a hearing on the question of costs may be dispensed with and have the matter determined "on the papers".

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2021

At a glance

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Judgment (15 paragraphs)

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Cases Cited (19)

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