(a) he thought that around the time of settlement LJ Hooker Maroubra contacted LJ Hooker, Mascot and ascertained the rental and the terms of the lease (T 60);
(b) he left it to LJ Hooker Maroubra to ascertain the correct rental;
(c) after he exchanged contracts his major concern was whether there was going to be a tenant in the premises;
(d) prior to settlement the only thing he looked at was the amount of the base rental so that he could work out whether to go ahead with the purchase. This was when Gadens provided those six pages (T 60);
(e) he looked very carefully at the lease document prior to settlement as he had to decide whether to go ahead on a $765,000 purchase (T 61); and
(f) he did not always know that the rent was $4,904 inclusive of GST (T 61).
54 There was no specific reference in the ADT's reasons to GST as it did not arise; the terms previously agreed included terms as to the amount payable by the plaintiff to Pokana for occupation of the premises. There had been a long contested hearing and the ADT member determined that there was a lease and its essential terms. That included the amount payable by the plaintiff. Up to the decision of the ADT member the amount payable by the plaintiff did not include any additional amount for GST.
55 In this unusual rectification case the lease that was to be executed by Pokana and the plaintiff was one that followed the decision of the ADT member as to its existence and its essential terms and the terms of what has variously been described as the old or second lease. Neither Pokana nor its solicitor was at liberty in the lease to be prepared to insert a term having the effect of increasing the amount payable by the plaintiff to Pokana. The foundation common intention was the agreement found by the ADT member. The lease to be prepared and executed was to follow that common intention. That lease was to include the other terms (often described as the subsidiary and incidental terms) often found in a lease. The lease prepared by the solicitor should not be seen as the starting point. It was secondary to the ADT member's decision. In the circumstances which existed, it is erroneous to treat the lease documents ultimately signed as having an independent existence and as a starting point.
56 The real difficulty in the present case lies in the interposition of Mr Kennedy and whether the lease should be rectified so far as it affects him. I accept that rectification is not available against an innocent third party who acquires rights for value under the contract in its original form.
57 It was not established whether Mr Kennedy was present at the ADT on 10 January 2003 or 11 March 2003.
58 The original contract of sale contained special provisions as to the giving of vacant possession. Once Mr Kennedy knew that there was going to be a lease he had to decide whether to proceed with the purchase of 123 Avoca Street. While he was probably keen to acquire the property, the return he was likely to receive was important, if there was going to be a tenant. On 29 May 2003 a copy of the lease apparently executed by the plaintiff was sent to Mr Kennedy's solicitors. That contained provisions requiring the lessee to pay the rent specified and an amount by way of GST. The copy lease forwarded on 29 May 2003 appeared to bear the initials of the solicitor for the plaintiff.
59 The plaintiff relied on the letter of 17 November 2003 to the plaintiff from LJ Hooker Maroubra which stated "… we need to have you in our office as a matter of urgency to sign the lease where previously it was not signed" and "If you do not do this by end of business 21 November 2003 the lessor mortgagee will lodge the security documents for registration and the non-lodging of the lease will be your responsibility." No further details were given on the first point. Mr Ostrovsky said that following receipt of this letter he attended at the office of LJ Hooker Maroubra and was handed a lease document which had not been signed by anyone. Mr Ostrovsky said that this was not the lease document that he executed after the ADT judgment on 10 January 2003 (probably 11 March 2003). Mr Ostrovsky said he took this lease document away to read through it. He said that when he read through it, it was very different to his old lease and therefore he did not sign it.
60 A Real Property Act search discloses that Land and Property Information New South Wales ("LPI NSW") advised that on 9 December 2003 a lease, given the number 9776708 was rejected. That appears to correspond with the copy lease bearing date 17 June 2003 with the stamp duty details endorsed and which appeared to be irregularly executed. It seems that the lease has never been registered. The search further discloses that on 30 December 2003 the transfer and mortgage were registered. That is the transfer of 123 Avoca Street to Mr Kennedy.
61 I think that the correct position is probably that on 11 March 2003 at the premises of the ADT Mr Ostrovsky signed the back page of the lease documents in the wrong place, that the plaintiff's seal was affixed to that page in the wrong place, that Mr Ostrovsky signed the back page again as requested by Mr Riddell opposite the corporate attestation clause, that the attestation clause for the plaintiff was not completed, that Mr Ostrovsky again signed the back page as guarantor, and his signature was witnessed by Mr Riddell, the solicitor for Pokana, that Mr Ostrovsky had no practical opportunity to read the document and received no adequate explanation of its terms. Subsequently the document was signed on behalf of Pokana and a copy supplied to Mr Kennedy's solicitors showing the various signatures. It seems that in early July 2003 attempts were made to remedy the "execution clause" of the plaintiff on the lease but they were unsuccessful. See the faxed letter of 4 July 2003 of Mr Kennedy's solicitors and subsequent correspondence. This was after settlement. Apparently no proper checks were made at settlement.
62 In November 2003 an attempt was made to remedy the situation. When this failed the deficient lease was lodged with the registration authority and rejected. Thereafter the transfer to Mr Kennedy and the mortgage from him were registered.
63 The plaintiff relied on three Trust Account Receipts issued by Goldline Realty Pty Ltd trading as LJ Hooker Maroubra on 17 July 2003, 19 August 2003 and 15 September 2003 which, after stating having received $4,904.90 for the months 7 July 2003 - 7 August 2003, 7 August 2003 to 7 September 2003 and 7 September 2003 - 7 October 2003 respectively, also stated:
"Inc GST
Arrears
0.00"
64 Reliance was also placed on various monthly Tax Invoices issued from 4 September 2003 onwards seeking rent of $4,904.90 per month and, as from April 2004, rent of $5003.00 per month (CPI increase). As from 29 September 2004 payment of extra moneys, that is amounts equivalent to GST, were sought by Mr Kennedy's agents backdated to 17 July 2003.
65 In its written submissions handed up on 21 April 2009 the plaintiff submitted that it was clear from the objective contemporaneous evidence that no lease document had been entered into by both parties. The evidence upon which the plaintiff principally relied was the defective corporate attestation clause, the letter of 17 November 2003 from the defendant's agents and the rejection of the lease for registration by LPI NSW.
66 Most of the problems stem from the lease document as drafted not being in accord with the ADT member's decision, the departures not being picked up by either Mr Ostrovsky or anyone else from the plaintiff or the legal representatives of the plaintiff in a timely way and the ADT noting that the parties have agreed to the terms of the lease, a copy of which was annexed to the ADT's Declarations and Order of 11 March 2003. That copy document contained in item 4 of the Second Schedule, basic rent of $58,857.60 per annum and clause 23.2 of the First Schedule. See the Certificate of 8 April 2003 of the Registrar of the ADT (Exhibit D).
67 Most of the oddities attending the execution of the lease appeared from the lease document handed over on settlement and also from the copy forwarded with Gaden's fax of 29 May 2003.
68 If either Pokana or the plaintiff had sought specific performance of the lease document or an order for further assurance, perhaps the plaintiff, its principal officers and its legal representative would have picked up the departure which had occurred from the ADT member's reasons for decision. It was in the interests of both the plaintiff and Pokana for the lease to be registered. This is usually attended to by the landlord's solicitors as the landlord or its mortgagee holds the certificate of title. The evidence establishes that the copy lease document as annexed to the Tribunal's Declarations and Order of 11 March 2003 and that annexed to the facsimile of 29 May 2003 were as to the critical provisions, being item 4 in the Second Schedule and clause 23.2 in the First Schedule, in the same terms.
69 Technically, the solicitor for the purchaser-defendant and the solicitor for the incoming mortgagee could have declined to proceed with the settlement on 27 June 2003 until the defective corporate attestation clause in the lease document was rectified.
70 In its Amended Summon and the Further Amended Statement of Claim the plaintiff did not seek a declaration that the parties had not entered into any lease, nor specific performance of the lease or agreement to lease found to exist by the ADT. Instead, the plaintiff approached the matter a little differently by seeking a declaration that the unregistered lease, in particular item 4(a), does not express the true agreement of the parties, an order that the said lease terms be rectified by replacing $58,857.60 with $53,506.80 in item 4(a) and an order that the defendant carry into effect the terms of the said lease so rectified. In practical terms there is probably no difference of consequence between the two approaches. I propose to proceed in accordance with the pleadings. The real dispute is as to the terms of the lease as identified by the plaintiff.
71 The plaintiff relied heavily on the knowledge and actions of the agents and the defendant raising no queries and taking no action for 15 months to obtain payment of the extra moneys. Reference was made to the documents issued by LJ Hooker Maroubra, from 17 July 2003 to September 2004, described variously as Trust Account Receipt, Tenant Tax Invoice, Tenant Status Report. The defendant received monthly statements from his agents. For 15 months the defendant was content with the moneys he was receiving. The defendant impressed me as financially astute and a man who, despite his many commitments and activities, would keep a close watch on his financial affairs and the moneys to which he was entitled and which he received. I did not accept Mr Kennedy's evidence so far as it suggested that he did not look closely at the amounts he was receiving and the make up of those amounts. He raised no queries for 15 months because he believed that the plaintiff was paying the correct amounts due to him under the lease document and to which he was entitled, that is, $58,857.60 per annum or $4,904.80 per month and the subsequent CPI increase which yielded a figure of $5,003 per month. If Mr Kennedy had believed that the tenant was not paying him all the moneys to which he was entitled he would have pursued the tenant. When his accountant suggested to him that he was entitled to more money Mr Kennedy welcomed the advice received.
72 The plaintiff submitted that the knowledge of the agents and the actions of the agent in collecting rents including its issue of documents was attributable to the principal, the defendant. The plaintiff relied on ASL Developments Limited v Sargent & Anor (1974) 131 CLR 634 per Stephen J at 649 and Mason J at 658, where the latter said:
"As against a third party the law imputes to a principal knowledge gained by his agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty fo the agent to communicate it to the principal. In the words of James LJ in Vane v Vane [citation omitted]:
"… the actual knowledge of the agents through whom an estate is acquired … is equivalent to the actual personal knowledge of the principal'."
73 The defendant submitted that this principle is not applicable in the circumstances of the present case.
74 The defendant left it to his agent, LJ Hooker Maroubra, to collect the total correct amount payable to him and for the period from June 2003 until September 2004. It did so by issuing tax invoices and trust account receipts. The agent sought $4,904.90 inclusive of GST and subsequently $5,003.00 which reflected the CPI increase. The agent accounted to the defendant for the money it had received. I have found that Mr Kennedy kept a close watch on his financial affairs and the moneys to which he was entitled and which he received and how they were calculated and that he raised no queries for 15 months because he believed that the plaintiff was paying the correct amounts due to him under the lease document.
75 The defendant submitted that the plaintiff was making a collateral attack on what was described as a declaration in its decision of 11 March 2003 which was, as previously mentioned, in these terms:
"The Tribunal notes that the parties have agreed to the terms of the lease, a copy of which is annexed to these orders."