PAN MACEDONIAN GREEK BROTHERHOOD v GREEK MACEDONIAN CLUB

Austotel Pty Ltd v Franklin's Self Service Pty Ltd (1989) 16 NSWLR 582 CASES CITED: Australian Crime Commission v Gray [2003] NSWCA 318 Galaxidis v Galaxidis [2004] NSWCA 111 Sullivan v Sullivan [2006] NSWCA 312

PARTIES: PAN MACEDONIAN GREEK BROTHERHOOD "ALEXANDER THE GREAT" NSW LIMITED (Appellant) GREEK MACEDONIAN CLUB "ALEXANDER THE GREAT" LIMITED (Respondent)

COUNSEL: D L WARREN (Appellant) H DANALIS (Sol) (Respondent)

SOLICITORS: Spanko Soulos & Co (Appellant) H Danalis & Co (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT DATE OF DECISION: 16 February 2007

LOWER COURT MEDIUM NEUTRAL CITATION: [2007] NSWSC 92

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40402/07

HODGSON JA TOBIAS JA BELL JA

Friday 8 February 2008 PAN MACEDONIAN GREEK BROTHERHOOD "ALEXANDER THE GREAT" NSW LIMITED v GREEK MACEDONIAN CLUB "ALEXANDER THE GREAT" LIMITED HEADNOTE

FACTS: The Brotherhood owned the property 160-164 Livingstone Road. The Club operated a club at those premises, paying rent to the Brotherhood at about $9,000 per month.

In 1999 the Club purchased the property 170 Livingstone Road for $292,000. Between 2000 and 2003, there were discussions between the Club and the Brotherhood about a transfer of number 170 to the Brotherhood. The Club wanted in return a reduced rent for the lease of the Club premises at 160-164. In 2002, a transfer of number 170 from the Club to the Brotherhood was signed, the stated consideration being $1.00. It was registered in May 2003. From September 2003, the Club ceased to pay rent for numbers 160-164 at $9,000 per month.

A new board of directors for the Brotherhood was elected in early November 2004. Following this the Brotherhood then required the rent to be paid at $9,000 per month. The Club defaulted and the Brotherhood gave a notice of termination of the lease on 16 November 2005.

At trial, the Club sought an injunction restraining the Brotherhood from taking possession of the premises at 160-164 and the Brotherhood cross-claimed for possession. The primary judge found that the Club transferred number 170 to the Brotherhood in reliance on an expectation or assumption that the Club would have the benefit of a ten-year lease of the Club premises at a rent of $40,000 per annum. In making this finding, the primary judge relied on conversations and meetings that took place between the Club and the Brotherhood before the transfer was registered. The primary judge held that the Brotherhood was entitled to possession by reason of the Club's default in payment, but that the club should be granted relief against forfeiture.

The Brotherhood's appeal from that decision involves four issues: (1) Whether it was correct to take the date of registration of the transfer as the critical date for considering the issue of inducement and/or reliance; (2) Whether the evidence supported a finding that there was an agreement or representations made to the effect that the rent would be reduced to $40,000 in consideration of the transfer; (3) Whether the representations were sufficiently certain; and (4) Whether during negotiations with the Club the Brotherhood's representative had authority to bind the Brotherhood.

Held (dismissing the appeal): (1) The primary judge was correct in having regard to the negotiations that took place up to the time the transfer was registered. In the circumstances, putting signatures to the transfer did not manifest an intention to make a binding contract. Even if there was such an intention, equity would probably have regarded it as unconscionable for the Brotherhood to enforce such a contract without granting rental concessions. (2) The evidence supported the findings in respect of the conversations between the Club and the Brotherhood. (3) The conversation as found by the primary judge was sufficiently certain. The period and rent of the lease were clear. The circumstances that the primary judge left the other terms to be the reasonable terms agreed by the parties or determined by the court did not preclude the conversation from being sufficiently certain. (4) The reasons given by the primary judge supported a finding that the Brotherhood's representative had authority to bind the Brotherhood.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40402/07

HODGSON JA TOBIAS JA BELL JA

Friday 8 February 2008 PAN MACEDONIAN GREEK BROTHERHOOD "ALEXANDER THE GREAT" NSW LIMITED v GREEK MACEDONIAN CLUB "ALEXANDER THE GREAT" LIMITED

Judgment 1 HODGSON JA: On 16 February 2007, Brereton J gave his decision in a case in which the respondent, which I will call the Club, had claimed an injunction restraining the appellant, which I will call the Brotherhood, from taking possession of premises occupied by the Club at 160-164 Livingstone Road Marrickville, of which the Brotherhood was the registered proprietor, asserting that it had an equitable leasehold estate in the premises; and in which the Brotherhood had cross-claimed for possession. 2 The primary judge decided that the Club was entitled to a lease of the premises for a term of ten years from 1 July 2003 at a rent of $40,000 per annum, inclusive of GST; that as at 6 November 2005, when a notice of termination was served by the Brotherhood, the Brotherhood was entitled to possession by reason of the Club's default in payment of rent; but that the Club should be granted relief against forfeiture. The primary judge made orders giving effect to those findings. 3 The Brotherhood appeals from that decision. 4 I will outline the background circumstances. 5 The Brotherhood has, since about the time of its incorporation in 1993, been owner of the subject property, 160-164 Livingstone Road; and the Club has operated a club at those premises, paying rent to the Brotherhood. From about 1999 until events which led to this litigation, this rent was about $9,000 per month. There was no written lease, but there was a resolution of the Club's board of directors in March 1999 to propose to the Brotherhood a ten year lease with a ten year option at a rental of $9,000 per month. 6 The Brotherhood and the Club had overlapping membership, and there was a close relationship between them. The Brotherhood was concerned with Greek social and cultural matters, while the Club operated a Greek social club. 7 In early 1999, Mr Constantinidis was president of the Brotherhood, and Mr Papadopoulos was a director of the Brotherhood and president of the Club. Mr Cosmidis was a director and secretary of both the Brotherhood and the Club. 8 In 1999 the Club purchased the property 170 Livingstone Road for $292,000, paying about $150,000 from its own funds and borrowing $150,000 from the Commonwealth Bank. It then renovated the property, spending about $100,000. 9 Between 2000 and 2003, there were discussions between the Club and the Brotherhood about a possible transfer of number 170 to the Brotherhood. The Club wanted in return to be permitted to use number 170 to accommodate visiting entertainers, and also to be granted a reduced rent for the lease of the Club premises at numbers 160-164. 10 In 2002, a transfer of number 170 from the Club to the Brotherhood, expressed to be for a consideration of $1.00, was signed on behalf of the Club by Mr Papadopoulos as president and Mr Cosmidis as secretary, and on behalf of the Brotherhood by Mr Papadopoulos as treasurer and Mr Cosmidis as secretary. It was stamped with duty on $380,000 on 17 December 2002, and was registered on 26 May 2003. After registration, the Brotherhood paid out the balance of the mortgage of about $45,000. 11 From September 2003, the Club ceased to pay rent for numbers 160-164 at $9,000 per month. 12 Paragraph [32] of the primary judge's judgment records minutes of a meeting of the board of directors of Brotherhood held on 4 February 2004 as follows: [32] Mr Constantinidis presided, and Mr Cosmidis and Mr Papadopoulos were amongst those present, at a meeting of the board of directors of the Brotherhood held on 4 February 2004. The minutes, which were prepared and signed by Mr Cosmidis, record that the president [Mr Constantinidis] had agreed with the committee [of the Club] to review the Club's rent from $9,000 monthly to $40,000 annually and to draw up a "license lease", and that a letter would issue to the Brotherhood to the effect that the Club would give some donation to the Brotherhood during the financial year. The minutes further recorded receipt of a donation of $10,000 from the Club, which was in effect payment of three months' rent. 13 The election of a new board of directors for the Brotherhood in November 2004 led to some change in the relationship; and subsequently the Brotherhood required rent to be paid at $9,000 per month, and eventually it gave a notice of termination of lease on 16 November 2005, giving rise to these proceedings. 14 The Club's case at trial, which was accepted by the primary judge, was to the effect that the Club transferred number 170 to the Brotherhood in reliance on an expectation or assumption, of which the Brotherhood knew, that the Club would have the benefit of a ten year lease of the Club premises at a rent of $40,000 per annum. This was based primarily on evidence of conversations at around the time of the transfer between Mr Papadopoulos on behalf of the Club and Mr Constantinidis on behalf of the Brotherhood. 15 In his recitation of facts, after referring to the stamping of the transfer on 17 December 2002 and its registration on 26 May 2003, the primary judge continued: [24] … Negotiations as to the detail of the arrangements continued in the interim. Mr Constantinidis - then on behalf of the Brotherhood - had conversations with the Club executive headed by Mr Papadopoulos, in which Mr Constantinidis proposed a rent following transfer of No 170 of $48,000 per annum for a term of ten years. Mr Constantinidis explained the theory underlying this as being that the house was regarded as being worth $550,000, subject to a mortgage of $50,000 to the bank, so that ten years at a concession of $50,000 a year would pay for the equity in the house. [Given that the Club was paying $90,000 rent for 2002-2003, discounted from $108,000 per annum, the mathematics of this is not precise, but the rationale is clear enough]. Mr Papadopoulos pointed out that another $100,000 had been spent by the Club on extensions and renovations and suggested $40,000 a year; Mr Constantinidis said that that sounded pretty fair, and also agreed to the use of the house for entertainers, but only for five years. 16 The primary judge indicated general acceptance of the evidence of Mr Papadopoulos and Mr Constantinidis, and indicated some reservations about evidence given by Mr Cosmidis. His critical findings are set out in paragraphs [54]-[55] and [58]-[59]: [54] The better view is that at least since early 1999 it was always contemplated that the Club would have a ten-year lease, that by the two AGMs of late 2002 it was mutually accepted that in return for a transfer of No 170 the Club's rent would be reduced, and that by the time Mr Papadopoulos instructed Mr Danalis to proceed to register the transfer in May 2003, Mr Constantinidis and Mr Papadopoulos had agreed on $40,000 per anum. On the view of the evidence which I prefer, Mr Papadopoulos and Mr Constantinidis had agreed to a ten year term at $40,000 prior to May 2003 when the transfer was registered, but even if they had not and the expectation was in that respect "not precisely defined", there was an assumption or expectation that there would be a ten year lease at a concessional rent, which was further defined by the parties - not later than the meeting of 4 February 2004 - as $40,000 a year.

[55] Although Mr Papadopoulos acceded in cross examination to suggestions that his discussions with Mr Constantinidis in late 2001 and late 2002 were of an informal nature, that does not detract from their capacity to create the relevant expectation. He made clear that it was "after the Brotherhood agreed, and the president promises me the rent going to reduce after we transfer, I gave instructions to Mr Danalis to transfer the house". The February 2004 meeting gave effect to the pre-existing understanding made before the transfer. While Mr Papadopoulos seems to have appreciated that the board of the Brotherhood had not formally approved until February 2004, and that until that point he simply relied upon the promise of its president Mr Constantinidis, the Board was content for Mr Constantinidis to negotiate the acquisition of No 170, who therefore had authority to make representations in connection with that acquisition; alternatively, the meeting of the Brotherhood's directors on 4 February 2004 ratified what Mr Constantinidis had earlier done purportedly on behalf of the Brotherhood.

[58] Accordingly, the Club transferred No 170 to the Brotherhood in reliance upon the expectation that it would be granted a lease at a concessional rent of $40,000 per annum for ten years. The only evidence as to the commencement date is that of Mr Papadopoulos, to the effect that the reduced rent would commence with effect from July 2003. Although in fact rent at $9,000 per month was paid until September 2003, the better view is that as July 2003 was discussed and apparently accepted on the basis that the transfer took place in May 2003, 1 July 2003 should be adopted as the commencement date.

[59] As to conduct on the part of the defendant, the Brotherhood, through Mr Constantinidis, plainly induced the Club to adopt the relevant expectation, and promoted and encouraged the Club's reliant activity namely the transfer of No 170. The negotiations between Mr Constantinidis and Mr Papadopoulos, and the statements made by him at the 2002 Brotherhood AGM, implicate the Brotherhood both in the creation of the expectation, and in encouragement of the transfer. 17 The primary judge's judgment concerning relief against forfeiture is not challenged on this appeal, and I need not say anything about that. 18 The Brotherhood relies on the following grounds of appeal: 1. His Honour erred in holding that the Respondent was entitled to a leasehold estate in the premises 160-164 Livingstone Road, Marrickville for a term of ten years from 1 July 2003 to 30 June 2013, at a rent of $40,000.00 per annum.

His Honour erred in finding that the Respondent transferred the property 170 Livingstone Road Marrickville ("the property") to the Appellant in reliance upon the expectation that it would be granted a lease at a rent of $40,000.00 per annum for ten years.

His Honour erred in finding that any expectation of the Respondent was such as to found a legally enforceable obligation against the Appellant.

His Honour erred in finding that the parties had agreed in May 2003 upon a rent figure of $40,000.00 per annum.

His Honour erred in concluding that the time of registration of the Transfer of the property was relevant in finding that there was an assumption or expectation on the part of the Respondent that there would be a lease given at a concessional rent.

His Honour ought to have found that the relevant time for the inducement of any assumption or expectation in the Respondent was when the signed Transfer of the property was given to the Appellant by the Respondent.

His Honour erred in not finding that at the time that the Transfer of the property was handed to the Appellant the Respondent did not have any assumption or expectation that it would be granted by the Appellant a lease of ten years over 160-164 Livingstone Road, Marrickville at a rent of $40,000.00 per annum.

His Honour erred in not finding that any expectation or belief held by the Respondent prior to May 2003 was so imprecise and undefined as not to enable there to be an estoppel binding upon the Appellant.

His Honour erred in concluding that any expectation brought about by discussions of an informal nature, in which the terms of the lease were not agreed, would be sufficient to support the imposition of a lease for a specific term of ten years at a specific rent of $40,000 00 per annum.

His Honour erred in concluding any representation was sufficiently or reasonably specific to found an expectation of the grant of a lease at a specific term at a specific rent. 19 In argument before this Court, four points were taken by Mr Warren for the Brotherhood, and I will deal with them in turn. 20 His first point was that the primary judge erred in taking the date of registration of the transfer as the critical date for considering the issue of inducement and/or reliance. 21 Mr Warren submitted that, at the latest, by 17 December 2002 the parties had signed the transfer; and he submitted that this amounted to an enforceable contract, satisfying the requirements of s 54A of the Conveyancing Act 1919. Accordingly, he submitted, this was the time when the Club was committed to the transaction and was bound to carry it through. Accordingly, any question of inducement or expectation or reliance should be considered as at 17 December 2002 at the latest. 22 It does not appear that this point was taken below. However, in fairness to the appellant, I would comment that there were no pleadings, and the estoppel case seems to have emerged during the hearing of the trial. It may be that, if this point had real merit, it could possibly justify a new trial. 23 However, in my opinion the point does not have merit. In my opinion, having regard to the circumstances in which the transfer was signed, between entities with some quite close association, during negotiations for collateral benefits and concessions, on the material before the primary judge the correct conclusion would be that putting signatures to the transfer did not manifest an intention to make a binding contract. 24 Even if such an intention had been manifested, in my opinion there would have been powerful equitable considerations against enforcing such a contract. If, before registration of the transfer, the Brotherhood had indicated that it would not give substantial rental concessions to the Club as were being discussed, there would be an extremely strong argument that equity would regard it as unconscionable for the Brotherhood to seek to enforce such a contract: that is, a contract to acquire property worth in the order of $400,000 for a consideration of $1.00 (or possibly $1.00 plus a $45,000 mortgage payout), which was entered into in the expectation that substantial rental concessions would be negotiated. On the other hand, upon registration, the transaction could be set aside only on proof of fraud. 25 In those circumstances, for the Club to permit the matter to go ahead to registration was substantial action to its detriment; so in my opinion the primary judge was correct to treat the date of registration as the date relevant to the Club's case of estoppel. 26 The second point relied on by Mr Warren was to the effect that the findings of fact made by the primary judge in paragraphs [24] and [54] were not supported by the evidence. Mr Papadopoulos, at Blue 5-6, gave evidence of a conversation in about October 2002 in which a lease for ten years for a rent of $40,000 was discussed; but Mr Warren's submission, as I understood it, was that this conversation did not indicate that such a proposal was assented to by Mr Constantinidis on behalf of the Brotherhood. Mr Constantinidis, at Blue 78, gave evidence of a somewhat similar conversation in which there was some assent by Mr Constantinidis to the proposal in the words, "sounds pretty fair", but that conversation was assigned no date; and in his oral evidence, Mr Constantinidis at one stage put the date at some unspecified time in 2003, and in other places said he did not know, and said it was something of a summary of a number of different conversations. 27 In my opinion, in circumstances where Mr Papadopoulos' evidence of the conversation was not challenged, it was well open to the primary judge to find a conversation containing elements in the versions of both of those witnesses, having taken place prior to May 2003; and in my opinion the challenge to the primary judge's finding of fact to that effect fails. 28 The third point raised by Mr Warren was to the effect that the representations as found by the Judge were not sufficiently certain. We were referred to a number of cases in which the question of certainty was discussed, namely cases of Austotel Pty Ltd v Franklin's Self Service Pty Ltd (1989) 16 NSWLR 582, Australian Crime Commission v Gray [2003] NSWCA 318, Galaxidis v Galaxidis [2004] NSWCA 111, and Sullivan v Sullivan [2006] NSWCA 312. 29 Perhaps as something of a fall-back position, Mr Warren also submitted that the conversations as found were somewhat equivocal between a rent of $40,000 per annum and a rent of $48,000 per annum; and in accordance with the approach that I had suggested in the case of Sullivan at paragraphs [84]-[86], the most that should be found in favour of the Club was a lease for a rent of $48,000 a year. 30 In my opinion, the conversation as found by the primary judge is sufficiently certain. It indicates a definite term for a lease of ten years and definite rent of $40,000 per annum; and the circumstance that the question of other terms of the lease has been left by the primary judge in his order as being to the effect of other reasonable terms as agreed by the parties or determined by the Court, does not prevent the conversation and the expectation being sufficiently certain. 31 The fourth point made by Mr Warren was to the effect that Mr Constantinidis was not shown to have authority to bind the Brotherhood. He referred to the reference by Mr Constantinidis, in the conversation deposed to by Mr Papadopoulos, to the board having a belief about the matter; and he submitted that the matter was one that would require the authority of the board to bind the Brotherhood. 32 Again this seems to be a point that was not taken below; and it does seem that the Club in its submissions below did make submissions which proceeded on the assumption that what occurred between Mr Constantinidis and Mr Papadopoulos would be sufficient to bind the Brotherhood, and it does not appear there was a submission to the contrary. 33 The primary judge did make a finding that Mr Constantinidis had authority to make representations, that finding being made in the last sentence of paragraph [55] of his judgment, which I have already quoted. In my opinion the reasons given by the primary judge do support such a finding. 34 I would add also that it may not be necessary, in any event, to establish authority to make the statements at the time they are made: if it can be inferred that members of the board knew that these negotiations were going on and these representations were being made, and if it can be inferred that the board would reasonably understand that the Club was relying on them, authority to make the representations at the time they were made may not be necessary. 35 So for those reasons, I would propose that the appeal be dismissed with costs. 36 TOBIAS JA: I agree with the orders proposed by the presiding Judge and with his Honour's reasons and just wish to add the following further remarks. 37 It is clear from the written submissions of the appellants in the court below which are to be found at Blue 1567, that although it was the Club's contention initially that there was an agreement for lease made in October 2002, which was denied by the Brotherhood, during the course of the hearing it became apparent that the Club was founding its case upon principles of estoppel rather than principles of contract. 38 Paragraphs 8 to 12 of those written submissions make it clear that the Brotherhood's response to the Club's claim to an estoppel was that there was no relevant representation made by the Brotherhood that if No. 170 Livingstone Road was transferred to the Brotherhood by the Club, then the latter would have the benefit of a lease over the premises which it then occupied for a period of ten years at an annual rent of $40,000. 39 The primary submission of the Brotherhood was that No. 170 Livingstone Road was transferred to it by the Club as a gift and was received on that basis. Those submissions are reflected in [48] of the primary judge's judgment. 40 It is further clear to me that the issue that was raised between the parties had nothing to do with the date upon which the transfer was executed compared to the date upon which it was registered. In this Court the Brotherhood has submitted that the relevant date for determining whether an estoppel arose was, at the latest, when the transfer was stamped in December 2002, it being noted that the transfer document is not itself dated. However, one could assume that it was signed and executed shortly before the time that it was stamped. 41 On the other hand, for reasons which are not apparent, and in respect of which there appears to be no relevant evidence, the transfer was not registered until May 2003. Yet the primary judge made clear in various parts of his judgment that the relevant finding that he was being asked to make was that there was either an agreement made by Mr Constantinidis on behalf of the brotherhood with Mr Papadopoulos on behalf of the Club that in the event that No. 170 Livingstone Road was transferred, then the Brotherhood would agree to a ten year term of the Club's premises at $40,000 per annum or that there was a representation by Mr Constantinidis to the same effect. 42 His Honour made a specific finding in [54] of his judgment in the following terms: "On the view of the evidence which I prefer, Mr Papadopoulos and Mr Constantinidis had agreed to a ten year term at $40,000 prior to May 2003..." 43 Other parts of his Honour's reasoning make it apparent that although the relevant reliance of the Club on the representation by the Brotherhood was evidenced by his transfer of No. 170 Livingstone Road to the Brotherhood, no point was sought to be made based on whether that transfer was to be taken to have occurred in December 2002 when it was presumably executed or May 2003 when it was requested. This is made particularly apparent in [39] of his Honour's judgment where he said: "On the other hand, the evidence of Mr Constantinidis was substantially corroborated by documentary material. It was not undermined in cross-examination. The evidence of Mr Papadopoulos was substantially consistent with that of Mr Constantinidis, although there were unsurprising and relevantly insignificant differences and inconsistencies as to dates. I accept that there were conversations between Mr Papadopoulos on behalf of the Club and Mr Constantinidis on behalf of the Brotherhood in which they reached a mutual understanding that in return for the Club transferring No 170 to the Brotherhood, the Brotherhood would reduce the Club's rent, and that subsequently greater precision was reached to the effect that the Club would pay $40,000 per annum for a term of ten years. …" 44 Finally, although I accept the limitation under which Mr Warren was operating in this Court in that neither he nor his instructing solicitors appeared for the Brotherhood in the court below, nevertheless Mr Danalis, who instructed counsel for the whole of the case in the court below on behalf of the Club, assured the Court that the point now sought to be raised was not taken at trial. The whole tenor of the primary judge's judgment supports that conclusion. 45 In these circumstances, I would have required the Brotherhood to obtain the leave of this Court for the purpose of advancing its argument that the relevant date at which to determine the issue of estoppel was December 2002 rather than May 2003. However, I would not have been prepared to grant that leave. 46 In any event, for the reasons indicated by the presiding judge, the point has no merit. 47 BELL JA: I agree with the orders proposed by the presiding judge, for the reasons that his Honour gives. I also agree with the additional reasons of Justice Tobias. 48 HODGSON JA: The order of the court is: appeal dismissed with costs. **********

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.