Papantoniou v Stonewall Hotel Pty Ltd

JUDGMENT

1. BEAZLEY P: I have had the advantage of reading in draft the reasons of Barrett AJA. I agree with his Honour's reasons and proposed orders.
2. WARD JA: I agree with Barrett AJA.
3. BARRETT AJA: This appeal concerns the efficacy of steps taken by a tenant on each of two occasions (in July 2010 and July 2015) to exercise an option to renew a lease of commercial premises in Oxford Street, Darlinghurst.

Persons and proceedings

1. The tenant ("Stonewall") brought proceedings in the Equity Division of the Supreme Court seeking declarations that it had validly exercised an option to renew on each occasion. The defendants were the persons who were, at the time of each purported exercise, the registered proprietors of the property of which the premises form part. They are John Papantoniou, Aristotelis Papantoniou, Stella Papantoniou and Efthemia Papantoniou. John Papantoniou and Aristotelis Papantoniou are brothers. Stella Papantoniou and Efthemia Papantoniou are their respective wives. Stella was, at relevant times, a solicitor in sole practice. John and Stella have a son, Christodoulos. Aristotelis and Efthemia have a son, Panos. Each son gave evidence in the proceedings but none of the co-owners gave evidence. Because the particular surname is shared by six relevant persons, it is convenient to refer to them by their forenames. Aristotelis and Efthemia are sometimes referred to as "the appellants".
2. John and Stella did not contest the effectiveness of Stonewall's actions to exercise the options. The appellants, by contrast, resisted Stonewall's claims for declaratory relief, maintaining that there had been no valid exercise of an option on either occasion.
3. The primary judge (Darke J) was satisfied that the action taken by Stonewall in both July 2010 and July 2015 was effective, in terms of the relevant lease provisions, to exercise an option to renew. He held that each notice of exercise had been served on an agent of the lessors having authority to receive that notice. His Honour therefore made the declarations sought by Stonewall and ordered that all four defendants grant to it a new lease for a five-year term commencing 4 November 2015. He also made certain costs orders against Aristotelis and Efthemia and in favour of Stonewall.
4. The appellants contend on appeal that this relief should not have been granted and that that the proceedings should have been dismissed. In doing so, they concentrate on the steps taken by Stonewall in July 2010 to exercise the option to renew for a five-year term ending in November 2015. Their position is that, if the controversy concerning the purported exercise in July 2010 is determined favourably to them, the possibility that there was a valid exercise of an option in July 2015 is non-existent, whereas if that controversy is decided adversely to them, they do not challenge the effectiveness of the steps taken in July 2015. Their case in relation to the notice by which the option to renew was supposedly exercised in July 2010 is that that notice was not duly given in accordance with the terms of the lease.
5. The appellants also challenge [1] the primary judge's interlocutory order dismissing an application directed towards the tender of certain documents that the appellants wished to put into evidence. [2]

Facts in brief

1. John and Aristotelis acquired the Oxford Street property in 1968. They held as tenants in common in equal shares. By a lease granted in November 2005, John and Aristotelis demised the relevant part of the property for a term of five years ending 3 November 2010 to Con Kostakides and Helen El Khoury who, by transfer dated 20 March 2007, assigned the lease to Stonewall. Three months later, in June 2007, each of John and Aristotelis transferred his interest in the reversion to himself and his wife as joint tenants, so that the undivided one-half share formerly held by John came to be held by John and Stella as joint tenants and the undivided one-half share formerly held by Aristotelis came to be held by Aristotelis and Efthemia as joint tenants. All transactions just mentioned were achieved by dealings registered under the Real Property Act 1900 (NSW).
2. The lease granted in November 2005 contained an option to renew for a further term of five years. The option was expressed to be exercisable within the period 4 May 2010 to 4 August 2010. Stonewall purported to exercise that option by a notice dated 29 July 2010 addressed to John and Aristotelis, care of Papantoniou Blake Lawyers, a law practice conducted at that time by Stella as a sole practitioner solicitor. The notice was sent by email, fax and registered post to the office of that law practice. It is accepted that it was received there on or about 30 July 2010.
3. It is accepted that no new lease was executed following the sending of the notice dated 29 July 2010. It is also accepted that, although no new lease was executed, Stonewall had a further option to renew by notice given within the period 4 May 2015 to 4 August 2015 and thereby to obtain a lease for a five-year term ending in November 2020. [3] In July 2015, Stonewall purported to exercise such an option by a notice sent by email to three email addresses: the address of Christodoulos, the address of Panos and the address of a firm of solicitors, Nicholas Angelos & Co.
4. There was no dispute at trial that each notice was, as to form and content, an appropriate notice of exercise or that it reached the destination (or destinations) to which it was directed. There was, however, substantial dispute as to whether the steps taken in relation to the notice dated 29 July 2010 were taken in a manner that accorded with the terms of the lease. As I have said, Aristotelis and Efthemia limit their submissions in this Court to issues concerning that notice.

Provisions of the lease

1. The provision of the lease granted in November 2005 governing exercise of an option to renew was clause 4.4: "4.4 The tenant can exercise the option only if - 4.4.1 the tenant serves on the landlord a notice of exercise of option not earlier than the first day stated in item 12D in the schedule and not later than the last day stated in item 12E in the schedule; 4.4.2 there is at the time of service no rent or outgoing that is overdue for payment; and 4.4.3 at the time of service all the other obligations of the tenant have been complied with or fully remedied in accordance with the terms of any notice to remedy given by the landlord. 1. If this lease is extended by legislation, items 12D and 12E in the schedule are adjusted accordingly."
2. The only questions at trial concerned clause 4.4.1. There was no issue concerning compliance with clause 4.4.2 or clause 4.4.3.
3. Clauses 14.2 and 14.3 provided: "14.2 A document under or relating to this lease is - 14.2.1 served if it is served in any manner provided in section 170 of the Conveyancing Act 1919; and 14.2.2 served on the tenant if it is left at the property. 14.3 This lease is subject to any legislation that cannot be excluded."
4. Clause 2.4 stated that if "a party consists of two or more persons", the "obligations of that party can be enforced against any one or more of them", but no submission based on that clause was made.
5. As has been stated, the grantors of the lease were John and Aristotelis; and Stella and Efthemia became additional co-owners of the property in June 2007, that is, after assignment of the lease by Kostakides and El Khoury to Stonewall in March 2007. Aristotelis and Efthemia accepted in this Court that notice of the assignments by John and Aristotelis to Stella and Efthemia respectively had not been given to Stonewall before 29 July 2010. [4] They also conceded that the efficacy of Stonewall's action to renew the lease by its notice of that date should be judged on the footing that John and Aristotelis alone were the "landlord" and that effective exercise of the option required compliance with clause 4.4.1 in relation to John and Aristotelis only. [5]

The appeal

1. The appellants and Stonewall are the active parties to the appeal. Stella filed a submitting appearance. John did not appear and there is evidence that he was not served, despite reasonable attempts at personal service by a process server whose affidavit was read in the course of the hearing of the appeal. Since John's interests coincide with those of Stella and no outcome inconsistent with his neutral stance at trial can result from the appeal, it was judged appropriate to proceed in his absence and to include an order for substituted service among the final orders.
2. The principal ground of appeal relied on by Aristotelis and Efthemia should be set out in full: "The primary judge erred in holding that the third respondent, who was a solicitor and partial co-owner of the subject property, was the agent or otherwise authorised for or by the appellants to accept service of the 30 July 2010; or was otherwise capable of binding the appellants' interest in the property."
3. This ground of appeal raises two issues: first, whether any mode of service on the lessor other than those specified in clause 14.2.1 was permitted and effective (and, in particular whether service on an agent was permissible); and, secondly (and if service on an agent was permitted), whether Stella was an agent of John and Aristotelis and had their authority to receive the particular document.
4. The remaining ground of appeal concerns the primary judge's refusal to grant a dispensation necessary to allow the tender of certain documents that Aristotelis and Efthemia wished to introduce into evidence. Because that ground of appeal has the potential, at least in the abstract, to cause the matter to be remitted to the Equity Division, it is convenient to deal with it first.

The rejected tender

1. Counsel for the appellants sought to tender before the primary judge five items of correspondence dating from 2002. He did so in the course of his cross examination of Christodoulos, the son of John and Stella, and after asking this question: "Is it correct to say that the relationship between, for some years, between your mother and Aristotelis Papantoniou has been less than friendly for many years? [sic]"
2. Counsel for John and Stella objected to the question on the ground of relevance. Counsel for the appellants then withdrew the question and indicated that he wished to take an alternative course of tendering the five documents, at which point counsel for John and Stella said that there was both "a Harman v Home Office issue" and a relevance objection; and that he opposed any attempt to use the documents in the proceedings. Counsel for the appellants then sought to be relieved of the obligation regarding use of the documents
3. The reference to "a Harman v Home Office issue" was, of course, a reference to what was seen in Harman v Secretary of State for Home Department [1983] 1 AC 280 as an "implied undertaking" given to the court but, as explained in Hearne v Street (2008) 235 CLR 125; [2008] HCA 36, is in truth a substantive legal obligation concerning use of documents or information obtained under compulsion for the purposes of a proceeding in court. The obligation upon the party who has obtained such material is to desist from using it otherwise than for the purposes of the proceeding in which it was obtained. The obligation may be modified or relaxed by the court.
4. The five documents sought to be tendered were two letters dated January 2002 and three dated February 2002. The January 2002 letters were from Panos (the son of Aristotelis and Efthemia) to Stella and, on their face, purported to have been sent by Panos on behalf of his father. The letters referred to what Panos apparently regarded as significant delay and unsatisfactory conduct by Stella, as a solicitor, in acting for John and Aristotelis in leasing matters involving "Taste of Tuscany" and to communication difficulties in relation to "Pizza Hut Carlingford". The three letters of February 2002 came from Stella's legal practice. They were addressed to Aristotelis and signed "Jacqui Griffin". The writer sought from Aristotelis instructions or confirmation of instructions in certain legal matters being handled by the practice for John and Aristotelis and asked, in particular, that Aristotelis himself "countersign" all instructions given by Panos.
5. Given that some of the letters were from Aristotelis's son and the others were letters to Aristotelis himself, one may wonder (as the primary judge did) why Aristotelis and Efthemia sought to tender copies obtained under compulsion in other Supreme Court proceedings, rather than their own copies. The reason was not explained and the primary judge proceeded to deal with the application for dispensation from the obligation according to its merits.
6. His Honour approached the application by reference to the context that had been exposed in the course of the proceedings. Because of evidence that Stella's legal practice had acted for John and Aristotelis on numerous leasing and associated matters involving several properties and that their respective sons were intermediaries through whom instructions of the fathers were sometimes conveyed, it was possible to infer from the five letters that, as at January and February 2002, there existed dissatisfaction on Panos's part regarding the handling of certain matters in which Stella's law practice was acting for John and Aristotelis. It was also possible to infer that Stella's law practice was unwilling to act in such matters on the instructions of John alone, wished to have confirmatory instructions from Aristotelis and was unwilling to regard instructions given by Panos as instructions from Aristotelis unless confirmed by Aristotelis.
7. The primary judge refused the application for relaxation of the obligation affecting the five documents and rejected the tender of them. He said that the documents were inadmissible because they lacked relevance. The reasoning was that, even if it were found that there had been disagreement or tension in January and February 2002 concerning leasing and other matters then in progress, that finding could not rationally affect the assessment of the probability that, eight years later, Stella had the authority of her husband and his brother to receive the July 2010 notice of exercise central to these proceedings.
8. In this Court, counsel for the appellants accepted that success in the appeal against the primary judge's refusal to grant dispensation from the obligation attaching to the five documents was dependent on the existence of error according to the principle in House v The King (1936) 55 CLR 499; [1936] HCA 40. It was accordingly necessary to show that the judge had acted on a wrong principle, allowed extraneous or irrelevant considerations to guide or affect him, mistook the facts or did not take into account some material consideration; or that, on the facts, the decision was unreasonable or plainly unjust.
9. Assessment against those criteria must be made having regard to the nature of this discretion concerned. That matter was considered by the Full Court of the Federal Court in Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; 218 ALR 283. It was there said (at [31]) that a party in the position here occupied by Aristotelis and Efthemia must show "special circumstances" in order to be released from the obligation. This does not mean that "some extraordinary factors must bear on the question before the discretion will be exercised". In Springfield Nominees Pty Ltd v Bridgelands Securities Ltd, (1992) 38 FCR 217, Wilcox J said (at 225) that for "special circumstances" to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. In other words, good reason must be shown why, contrary to the usual position, the constraint should not apply; and that reason must be found in all the circumstances of the case. If the court does find "special circumstances", it then has "a broad discretion as to whether or not to grant leave": James G Oberg (Sales) Pty Ltd v Oberg [2012] FCA 722; (2012) 292 ALR 673 at [27] (Edmonds J).
10. It is fair to say that counsel for the appellants did not engage closely with the issue of "special circumstances" or the factors made relevant by the principle in House v The King (above). The submission was that the decision to refuse release from the obligation was, on the facts, unreasonable or plainly unjust because the appellants (or one of them) were already privy to the documents and those documents were to be used in cross examination on the central issue in the case, with the result that special circumstances existed.
11. That submission cannot be accepted. The most the letters could have shown is that Panos (not Aristotelis) was unhappy about aspects of legal work done for John and Aristotelis in Stella's office in 2002 and that a person within that office other than Stella herself (namely, Jacqui Griffin) had sought to establish with Aristotelis certain lines of communication calculated to ensure that instructions received were instructions of both John and Aristotelis. Stella was not a party to the correspondence beyond being the addressee of the two letters sent by Panos. And the letters from Jacqui Griffin to Aristotelis were businesslike requests that certain prudent communication protocols be adopted as between the practice and its clients, John and Aristotelis. That, coupled with the fact that the correspondence took place eight years before the events to which the question of Stella's status and authority as an agent were pertinent, amply justified a finding that the content of the documents, if accepted, could not rationally affect the assessment of the probability that, in July 2010, Stella was (or was not) authorised, as agent of John and Aristotelis, to receive the notice of exercise of option. No feature of the case of a special and unusual kind called for availability of the letters for evidentiary purposes and the judge's decision to refuse the application was neither unreasonable nor unjust.
12. The ground of appeal concerning the 2002 letters cannot be upheld.

Clause 14.2.1 - mandatory or facultative?

1. Clause 14.2.1 of the lease is the only provision concerning service on the lessor. It states that a document under or relating to the lease "is . . . served if it is served in any manner provided in section 170 of the Conveyancing Act 1919". Section 170, so far as relevant to the circumstances, specifies alternatives in sub-s (1): "Any notice required or authorised by this Act to be served shall be in writing, and shall be sufficiently served: (a) if delivered personally, (b) if left at or sent by post to the last known residential or business address in or out of New South Wales of the person to be served,"
2. It was not (and is not) disputed that, having regard to the principle that there can be no effective exercise of an option unless the prescribed procedure for exercise is strictly followed (Tonitto v Bassal (1992) 28 NSWLR 564 at 574, Sheller JA), it was necessary that a notice in conformity with clause 4.4.1, as to content and timing, be "served" on the lessors, being John and Aristotelis. Nor is it disputed that clause 14.2.1 has relevance to the question whether a notice has been "served". The issue both before the primary judge and in this Court concerns the role played by clause 14.2.1 and whether the clause is mandatory or facultative or, putting this another way, whether it prescribes the exclusively available methods of service, as distinct from identifying in a non-exhaustive way certain methods that the parties agree to be sufficient.
3. The primary judge decided that the provision was facultative only. His Honour said: "The second and fourth defendants [Aristotelis and Efthemia] submit that the provisions of the lease (including cll 4.4.1, 14.2 and 14.3) require the tenant, when seeking to exercise an option to renew, to serve the notice of exercise on the landlord in accordance with s 170 of the Conveyancing Act. The plaintiff submits that upon the true construction of the lease service of the notice in accordance with s 170 is permitted but not required. That is to say, cl 14.2 should be regarded as facultative only. The plaintiff's submission should be accepted. I do not think that the language of cl 14.2, or of the lease as a whole, suggests that cl 14.2 prescribes the only means by which a document can be served so as to be effectual (cf Comdox No 24 Pty Ltd v Robins [2009] NSWSC 367 at [19]). If that had been intended, language suitable for that purpose could easily have been employed. Rather, it seems to me that cl 14.2 is concerned only with identifying certain modes of service which will be sufficient, without going so far as to state that those modes are the only ones available (see Comdox No 24 Pty Ltd v Robins (supra) at [23]). Further, cl 14.3 does not in my view have the effect of making compliance with s 170 of the Conveyancing Act mandatory. Section 170 applies to notices required to be served under the lease (see s 170(2A) of the Conveyancing Act; see also Bressan v Squires [1974] 2 NSWLR 460 at 463; and Lolly Pops (Harbourside) Pty Ltd v Werncog Pty Ltd [1998] NSWSC 304; (1998) 9 BPR 16,361 at 16,371), but only if and so far as a contrary intention is not expressed in the lease (see 2 170(4) of the Conveyancing Act and FAI General Insurance Company Ltd (in liquidation) v Parras (2002) 55 NSWLR 498; [2002] NSWCA 334 at [18]). The section is thus not "legislation that cannot be excluded" for the purposes of cl 14.3. It follows that a notice of exercise of option pursuant to cl 4.4 of the lease may be validly served on the landlord if served in accordance with s 170 of the Conveyancing Act or the general law."
4. The appellants contend that this conclusion is erroneous and that clause 14.2.1 identifies the exclusively available modes of service on the lessor. They further say that the only aspect of s 170(1) of the Conveyancing Act that could conceivably have been satisfied by the action taken by Stonewall in relation to the 29 July 2010 notice is that in s 170(1)(a) or s 170(1)(b) and that, in the events that happened, neither was satisfied.
5. The question of construction is whether the words "is ... served if" (in the phrase "is … served if it is served in any manner provided in section 170 …") mean (a) "is … served only if"; or (b) "is … sufficiently served if".
6. The appellants embrace the first construction, Stonewall the second.
7. The words of s 14.2.1 must, of course, be construed in the whole of the context in which they are found. The lease embodies a commercial contract. [6] It is well established that the terms of such a contract are to be understood objectively, according to what a reasonable businessperson would have understood them to mean; and that, in a practical sense, this requires that the reasonable businessperson be placed in the position of the parties, with the court considering, from that perspective, the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 91 ALJR 486 (at [16]); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (at [35]).
8. As executed in November 2005, the lease named John and Aristotelis as lessors and Kostakides and El Khoury as lessees. It did not include an address for any of those persons. Nor is there a name or address in the space for "Lodging Party". The signatures of John and Aristotelis are appended, as is the signature of a witness to each. The witnesses' addresses are included, one at Castle Hill and the other at Marrickville. Certain certificates given by Stella as a solicitor follow the lessors' signatures. The certificates carry an address for Stella at Toongabbie. The lease was varied by the document of 20 March 2007. The parties to that document were John, Aristotelis, Kostakides and El Khoury. The document contains no address for either John or Aristotelis.
9. Neither the lease itself nor the variation document provided any means by which the person who was, for the time being, the lessee could know or discover where the lessors might be found or their residential or business addresses. Information about those matters was not something that the transaction documents themselves either disclosed to the lessee or suggested was of any relevance to the lessee's relationship with the lessors. [7] Of course, the lessee might, quite independently, have come to possess knowledge of the habits and circumstances of the lessors and, in that way, to acquire an ability to act in relation to each of them in a way contemplated by s 170(1)(a) or s 170(1)(b). But the gaining of such knowledge would be no more than fortuitous. It is, in those circumstances, impossible to infer an intention of the parties that the only permissible and effective methods of service by the lessee upon the lessors were those that could be availed of only if specific information not actively communicated as part of the transaction had, purely by chance, come into the lessee's possession by the time it wished to serve a notice. Nor can it be accepted that the parties intended that the lessors could, by secreting themselves away in some unknown or inaccessible place (and deliberately keeping from the lessee particulars of their residential and business addresses), effectively thwart every effort the lessee might make to effect service on them, secure in the knowledge that there was no mechanism to cause some substituted method of service to be applicable.
10. The appellants sought to support their contention that clause 14.2.1 is mandatory rather than facultative by pointing to the words "only if" at the start of clause 4.4. It may readily be accepted that those words exclude alternatives and indicate a single permissible course of action. But the single course of action that follows "only if" is that which the tenant must take in order to exercise the option. It is true that a process of "service" of a notice is indispensable to exercise of the option but the question of what constitutes "service" is distinct from the question to which clause 4.4 and its words "only if" are irrelevant.
11. In my opinion, all the considerations I have mentioned point decisively to the conclusion that clause 14.2.1 is a provision which, when read in the way that a reasonable businessperson would understand it, serves the purpose of putting it beyond doubt that service on the lessors is effected if a particular procedure is followed but does not make that procedure the only effective procedure. The clause is a deeming provision. Its effect is that, if any of the procedures identified in s 170 of the Conveyancing Act is followed in relation to a document, that document is taken to have been served for the purposes of the lease. It is not a provision that excludes and renders ineffective every other mode of service. To adopt words used in Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9 at [41] (Basten JA), the effect of the clause is "to provide a mandatory result if its conditions are followed, but not to invalidate a notice which is non-compliant". If the latter position had been intended, "the language would be more disciplined and the drafting tighter": Comdox (No 24) Pty Ltd v Robins [2009] NSWSC 367 at [19] (Bryson AJ).
12. The primary judge correctly rejected the appellants' contention that the only modes of service available in relation to the 29 July 2010 notice were those specified in s 170 of the Conveyancing Act.

Was service on an agent permissible?

1. In Galinski v McHugh (1988) 57 P&CR 359 (at 363), the English Court of Appeal said: "[U]nder the general law of landlord and tenant it is possible for good service of notices to be effected by serving them on the agent of the landlord or tenant as the case may be."
2. This was recognised also in Yenula Properties Ltd v Naidu [2001] EWHC Ch 387 [8] where Lloyd J said (at [75]): "There is no doubt that, as a matter of general law, notices may be served by and on agents as well as by and on the principals, whether the notice is to be served by landlord on tenant or by tenant on landlord."
3. The law is the same in Australia: see, for example, Young v Lamb [2001] NSWCA 225; (2001) 10 BPR 18,553 at [36], Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625; (2002) 11 BPR 20,281 at [13]; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203 at [38].
4. A party seeking to rely on this general law principle to establish good service must show that the person served supposedly as agent was in truth an agent invested with relevant authority. Given the nature of the process, the authority that the supposed agent must be shown to have had at the time of service is authority to receive or accept the particular notice or documents of a class that includes the particular notice.
5. Agency may, of course, be actual (whether express or implied) or ostensible. But there can never be a finding of agency except by reference to some conduct of the supposed principal. The nature of the two kinds of actual authority was explained by Lord Denning MR in Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583: "[A]ctual authority may be express or implied. It is express when it is given by express words … It is implied when it is inferred from the conduct of the parties and the circumstances of the case … Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it."
6. In the case of ostensible authority, the necessary representational conduct of the principal may take many forms, its essential feature being that it is of such a quality as to induce a rational belief that the supposed agent possesses the principal's authority: see generally Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [36] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). One relevant species of representational conduct occurs when the principal allows the agent to act in a particular way indicative of authority without taking steps to dispel an assumption of authority thereby reasonably induced in the person with whom the agent deals: Thompson v Palmer (1933) 49 CLR 504; [1933] HCA 61 at CLR 547 (Dixon J).
7. Sometimes, the relevant authority will be that of a "general agent" empowered to do anything the agent chooses in relation to the subject matter of the agency. In other cases, the authority will be narrow and specific and the agent may be referred to as a "special agent". Phoenix Assurance Co Ltd v Berechree (1906) 3 CLR 946; [1906] HCA 6 at CLR 961 (Griffith CJ). Often, however, these labels are unhelpful since the real question is as to the scope of the agent's authority as indicated by the evidence as a whole.
8. The primary judge was correct to proceed on the footing that, because clause 14.2.1 was facultative and not mandatory, the general law allowed Stonewall to serve notice of exercise of the option on an agent of John and Aristotelis.

Was Stella an agent with the requisite authority?

1. As I have said, the appellants do not dispute that the notice dated 29 July 2010 reached Stella's office on or about 30 July 2010 as a result of Stonewall's actions referred to at [10] above. Nor do they dispute that Stella was thereby duly served. [9] But they challenge the primary judge's conclusion that Stella was the agent of John and Aristotelis and had authority to accept service of the notice. It is therefore necessary to refer to a number of factual matters.
2. The primary judge made the following unchallenged findings (or inferences) of fact: 1 On 28 July 2010 (seven days before the expiry of the period in which the option could be exercised), a director of Stonewall received an email from Stonewall's solicitor, Mr Garvan, confirming that he had spoken with Stella who confirmed that the notice of exercise of option should be sent (by registered post and fax) to her office address. 2 On about 28 July 2010, Stella had a conversation with Mr Garvan in which she told him that the notice of exercise ofoption should be sent to her firm, consistent with an understanding on her part that her firm was authorised to receive such a notice. 3 On 30 July 2010, Stonewall sent the notice of exercise to the address of Stella's legal practice as it had been instructed to do by Mr Garvan and Stella. 4 Stella was instructed to act as solicitor for John and Aristotelis in about 1988, was acting as their solicitor in late 2006 when they entered into an agreement with Stonewall and acted as their solicitor when they transferred their interests in the property to their respective wives and themselves in June 2007. 5 There was documentary evidence that Stella's legal practice was acting for John and Aristotelis in November 2009, including a letter from Stella to Stonewall dated 19 November 2009 in relation to increased rent payable under the lease. 6 Stella's practice was acting for Aristotelis and Efthemia in 2010 in relation to the registration of a lease over another property. 7 No suggestion was made by John and Aristotelis (in 2015 or subsequently) that Stella was not acting for them in 2010.
3. The primary judge was satisfied that, on the totality of the evidence, Stella was acting as the solicitor for John and Aristotelis and with their authority when she received the notice of exercise of option on about 30 July 2010; and that, in the period from about 2006 to 2010, she held a general retainer to act as the solicitor for them on whatever matters of a legal nature arose concerning the premises and the leases which had been granted in respect of the premises.
4. His Honour also held that, in the period after the purported exercise of the option in 2010, the parties dealt with each other on a basis consistent with a valid exercise of the option and the existence of a new lease, including in respect of annual rental increases which were consistent with the terms of a new lease that would arise upon the exercise of the option to renew and inconsistent with the terms that would apply if the tenant's continued occupation of the premises was not under a new lease.
5. The appellants contend that the facts found by the primary judge were insufficient to support his conclusion of agency and authority on the part of Stella. They point to two particular matters as indicative of the insecure basis for any such conclusion: first, a finding that the evidence of Christodoulos was in "rather general terms and was in some respects quite vague"; and, secondly, Christodoulos's evidence that Stella maintained a single "lease file" in relation to the work she carried out, which file, he said, contained, apart from the notice of 29 July 2010, "no other documents . . . in relation to the exercise of the option" (it should be explained that Christodoulos, although not legally qualified, was "practice manager" for his mother).
6. I am not persuaded that these matters call into question the primary judge's conclusion. The factual findings are supported in very large measure by documentary evidence and rely only peripherally on testimony of Christodoulos. In addition, any impression that the "lease file" in Stella's office contained only one document (being the 29 July 2010 notice of exercise) is not supported by the evidence. Christodoulos was asked about the content of the lease file as it concerned the narrow and specific matter of the exercise of the option. His reference to a single document indicated merely that, as regards that narrow and specific matter, the file contained only the notice of 29 July 2010. Understood in that way and in the context of the question he was asked, Christodoulos's evidence as to the content of the file indicated nothing about the existence of documents about aspects of the lessor-lessee relationship other than the narrow matter of exercise of the option and nothing about instructions given and received by Stella over the years in relation to the lease and the property.
7. The primary judge drew a Jones v Dunkel [10] inference from the fact that neither Aristotelis nor Efthemia gave evidence. While their counsel did not dispute that that his Honour correctly did so, he submitted that such an inference "can only go so far" and that the evidence as a whole was insufficient to support the judge's conclusion. The primary judge did not seek to rely on the inference beyond permissible limits. He did not impermissibly employ Jones v Dunkel reasoning to remedy any perceived deficiency in evidence. He took the entirely orthodox course of reaching the independently available conclusion with greater confidence because of the unexplained absence of evidence from parties uniquely placed to throw light on the issue.
8. I must make particular reference to one document taken into account by the primary judge which strongly supports his Honour's conclusion on the matter of Stella's agency and authority. In about November 2006, John and Aristotelis ("Grantor") and Stonewall ("Grantee") entered into an apparently undated deed entitled "Agreement for lease". The deed bears the signatures of John and Aristotelis as "Grantor" and that of Stella as witness. It is a curious document, in that it relates to the lease already on foot between John and Aristotelis as lessors and Kostakides and El Khoury as lessees ("Lease") but provides, in its main operative clauses: "the Grantor will grant or procure the grant to [sic] and the Grantee will [sic] an assignment of the Lease"; and "The Grantor is irrevocably authorised by the Grantee to procure an assignment of the Lease from the Original Lessee to the Grantee."
9. Whatever may be the precise import of these operative provisions, the deed was obviously the medium through which Stonewall first entered into a commercial relationship with John and Aristotelis concerning the leased premises. The aspect of the deed of particular relevance for present purposes is clause 4.3 which states that any notice or other communication to be given to a party "must be addressed to the address shown in this Deed for that party" (or any other address nominated by the party). The address "shown in this Deed" for John and Aristotelis (in the description of the parties) is: "c/ Papantoniou & Associates, 36 Aurelia Street, Toongabbie, NSW 2146".
10. "Papantoniou & Associates" is a name under which Stella formerly practised as a solicitor. Her office was, at all material times, at the Toongabbie address.
11. From the very beginning of Stonewall's association with the leased premises, therefore, it was on notice, albeit for the specific purpose of written notices and communications concerning the "Agreement for lease", that it was expected - indeed, required - to communicate with John and Arisotelis through Stella's law practice. And it was that very means of communication that was confirmed to Stonewall's solicitor when he made specific inquiries as to where a notice exercising the option should be sent (see [55.1] and [55.2] above above).
12. Before leaving this aspect, I must refer to the decision of this Court in Nguyen v Taylor 27 (1992) NSWLR 48 on which the appellants placed emphasis. One of the issues in that case was whether a solicitor had the authority of his client to sign and deliver a notice exercising an option to purchase land. Meagher JA (with whom Kirby P and Sheller JA agreed on the particular point) said (at 59) that "it is clear law that a solicitor has no implied authority to make a contract on behalf of his client". The decision of the High Court in Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146; [1964] HCA 61 was cited in that connection. This Court held, however, that instructions to the solicitor to take whatever steps were necessary to complete the purchase of the land implied actual authority to exercise the option, that being an essential step towards completion of the purchase. The "clear law" to which Meagher JA referred is of no assistance to the appellants in the present case. The situation before the primary judge was not one in which it was sought to cast Stella in any active role of making a contract on behalf of her clients. There is a significant difference between giving a notice of exercise of an option to purchase (or to renew a lease) and receiving such a notice. The grantee (or holder) of an option, by giving notice, actively causes new rights and obligations to come into existence. The grantor, by receiving the notice, merely plays a passive and mechanical role that crystallises the conditional commitment to sell (or grant) to which that grantor is already subject. The grantee, when giving a notice, makes a choice and exercises commercial judgment. The grantor has no discretion whether or not to receive the notice and therefore does not make a choice or exercises judgment. The authority as agent that the primary judge found Stella to have had was, as regards the notice of 29 July 2010, authority to be merely a passive recipient.
13. The decision of the primary judge on the question of Stella's status and authority as agent was correct.

Conclusion

1. Because the provisions of the lease allowed exercise of the option by service of notice on an authorised agent of the lessors and Stella was, as at July 2010 the agent of the lessors with authority to accept service of the notice dated 29 July 2010, there was a valid and effective exercise of that exercise on the part of Stonewall by means of the steps described at [10] above. [11]
2. Given the concession referred to at [7] above, this is sufficient to dispose of the appeal. I propose the following orders:
3. Order nunc pro tunc with respect to the notice of appeal herein that, instead of service on John Papantoniou, the following step be taken for bringing the document to the notice of the said John Papantoniou, namely, depositing a sealed copy thereof by Michael Guest into the letterbox of the residential premises identified in the affidavit of Michael Guest sworn on 10 April 2018 and filed herein.
4. Appeal dismissed
5. Order that the appellants pay the costs of all respondents.

Endnotes

1. In accordance with Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; [2002] HCA 22.
2. The appellants ultimately did not press a challenge to the primary judge's refusal to accede to an application after judgment for an order setting aside the declarations and orders made by way of final relief.
3. A variation of the 2005 lease made in March 2007 introduced a provision creating an option to renew for a period of five years from 4 November 2015.
4. This was consistent with the evidence of Mr Foo, a director of Stonewall.
5. At one point in submissions, counsel for the appellants seemed to accept that service on John and Aristotelis could be regarded as service on each of them not only for himself but also for his wife. No such concession was ultimately made, as it would have entailed acceptance of the proposition that service on an agent was permissible. In the end, the appellants took the position that, if service on John and Aristotelis was established, there would be no submission based on absence of service on Efthemia (it was accepted that Stella had been served: see [54 ] below).
6. In The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14 (at CLR 29), Mason J said that "the law of landlord and tenant has outgrown its origins in feudal tenure", with the result that "the ordinary principles of contract law … apply to leases". The ordinary principles that apply to the construction of commercial contracts obviously apply to commercial leases.
7. The lease required payment of rent and other moneys "to the landlord or as the landlord directs". If a direction to pay to, say, a managing agent were put in place at the outset, the lessee might never have direct contact with the lessors or obtain knowledge of their whereabouts or addresses. Another possibility is that the landlords might call at the premises to collect payments. In that event also, there would be no occasion for the lessee to acquire such knowledge.
8. Affirmed sub nom Naidu v Yenula Properties Ltd [2002] EWCA Civ 719; [2003] L&TR 9.
9. If, contrary to the appellants' concession mentioned at [17] above, service on all of John, Aristotelis, Stella and Efthemia was required in order to exercise the option, the appellants' acceptance that Stella had been served, viewed in light of the finding that clause 14.2.1 is facultative only, meant that one, at least, of the four co-owners had been served. Counsel for the appellants made submissions about the effect of the grant of a lease by one of several co-owners. That matter need not be addressed. The obvious intent of the provisions concerning renewal is that, in consequence of exercise of the option, the lessee should enjoy a leasehold estate denying throughout the new term all rights of possession of every co-owner as against that lessee. The possibility (discussed in Frieze v Unger [1960] VR 230) of a leasehold estate in an undivided interest and co-existence of rights of possession in both the holder of that leasehold estate and the non-leasing co-owners is not contemplated by the renewal provisions.
10. Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8.
11. It should be added that if, contrary to the conclusion I have reached, clause 14.2.1 made service in accordance with s 170 of the Conveyancing Act the only permissible mode of service on the lessors, the matter referred to at [62]-[63] above might well justify a conclusion that Stonewall had caused the notice of exercise to reach the "business address" of the lessors last known to it. There is, however, no need to express any concluded view on this issue which does not directly arise upon the appeal. 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: 27 April 2018