Restuccia & Ors v Entasil Pty Ltd [2000] NSWSC 290 | Case summary

REASONS FOR DECISION Introduction 1 In this case, the principal issues arising were the following: (a) whether the evidence established that one of three lessees under a retail shop lease which contained an option of renewal by written notice communicated the lessees' desire to exercise the option of renewal in the course of a telephone conversation with the managing agent of the lessor; (b) whether the agent indicated to the lessee that she had thereby done enough to exercise the option; and (c) if so, whether the agent had authority to bind the lessor in so doing, with the consequence that the lessor should be taken to have waived the requirement of written notice and/or to be estopped from denying that the option had been validly exercised. 2 In their application to the Tribunal, the lessees sought declarations and accompanying orders confirming their entitlement to a lease as specified in the option to renew or, in the alternative, for damages for unconscionable conduct and/or misleading or deceptive conduct on the part of the agent. 3 Because the Notice of Application included an unconscionable conduct claim, the Tribunal has been constituted in these proceedings in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by one appropriately qualified member (Non Judicial Member Harrison), acting in an advisory capacity only. Since no appropriately qualified member was available to participate as a second advisory member, the Tribunal's decision to hear the case with only one advisory member was authorised by sub-paragraph (a) of Clause 4 of Schedule 2, Part 3B of the ADT Act. The Tribunal drew the parties' attention to this provision. 4 The Notice of Application was filed on 16 May 2007. Mediation was not attempted since the Tribunal found, at a directions hearing on 21 June 2007, that due to a refusal by the Respondent to participate, mediation was unlikely to resolve the dispute. Outline of evidence 5 In 2002, Elena Restuccia ('Ms Restuccia'), Michelle Totaro and John Totaro, who are the Applicants in these proceedings, entered into a lease (hereafter 'the Lease') of premises at 701-703 Darling Street, Rozelle ('the Premises') for the purpose of conducting a restaurant business. The lessors, Frank and Elizabeth Restuccia, were the parents of Ms Restuccia and Ms Totaro. 6 The term of the Lease was from 1 April 2002 to 31 March 2007. It contained two five-year options of renewal, commencing from 1 April 2007 and 1 April 2012 respectively. The initial rent, exclusive of GST and outgoings, was $78,000 per year, payable in monthly instalments of $6,500. There was provision for annual rent adjustment, with the rent to be increased by the lesser of 5% and the CPI. The Lease was a registered lease and was governed by the Retail Leases Act 1994 ('the RL Act'). 7 Clause 4.4 of the Lease was as follows: - 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. 8 The schedule to the Lease stated in items 11D and 11E that the first and the last days on which the options for renewal could be exercised were, respectively, 90 days and 21 days prior to the expiry of the term. It was admitted that the references in clause 4.4.1 to items 12D and 12E were in fact references to items 11D and 11E. Consequently, the period during which the first option of renewal could be exercised ran from 1 January 2007 to 10 March 2007. 9 Clause 14.2.1 of the Lease stated that a document under or relating to it was served if was 'served in any manner provided in section 170 of the Conveyancing Act 1919'. 10 On 26 July 2004, the Respondent, Entasil Pty Limited, purchased the property in which the Premises were situated from its then owners (who were not the original lessors). The following day, C P White & Sons (Burwood), who were the Respondent's solicitors, sent a letter, accompanied by a notice of attornment, to the Applicants, advising them of the purchase and stating that 'they should be pleased if all future rent payments could be made to Ray White Real Estate, 222 Victoria Road, Drummoyne 2047, Tel: 9719 2244'. The letter did not contain the registered office of the Respondent, nor any other address at which it could or should be contacted. 11 On or about 11 August 2004, the Respondent executed a management agency agreement ('the Agency Agreement') appointing a company called Paramount Properties and Management Pty Ltd, trading as Ray White Drummoyne (hereafter 'Ray White'), as its agent in respect of the Respondent's property at 701-703 Darling Street Rozelle. The relevant clauses of this agreement were as follows: - 3. The Authority vested in the Agent by this agreement shall be deemed to be vested in the Agent's employees from time to time. 7. Except as provided for in the Special Instructions attached hereto, the Agent is not authorised to enter into and sign leases on behalf of the Principal. 9. In respect of each LEASE the Agent is authorised and directed on behalf of the Principal to:… (g) Exercise the Principal's rights to vary or terminate the lease by services of notices as necessary. 10. In respect of each tenancy the Agent and each of every one of their partners, employees or other officers from time to time as the case may be is authorised and directed on behalf of the Principal to lay any information against tenants and do all things necessary to commence and (as far as practicable) complete proceedings for: (a) The ejectment of tenants (b) The recovery of moneys due. 12 Clauses 9 and 10 formed part of a section of the agreement headed 'Administration of leases'. 13 Mr Arthur Laundy, who was a director of the Respondent at all material times, testified with reference to clause 7 of the Agency Agreement that the Respondent never authorised Ray White to enter into and sign leases on the Respondent's behalf. He also testified that he did not expect that by virtue of the agreement a notice under clause 4.4.1 of the Lease purporting to exercise the option of renewal could validly be served on Ray White. A copy of the agreement was annexed to his affidavit. No 'special instructions' were attached to it. 14 In the second half of 2004, Mr Laundy contacted Mr Totaro (the third-named Applicant) and expressed interest in purchasing or relocating the Applicants' business. He told Mr Totaro that he wanted to establish a bottle shop within the building. He had in fact applied for a liquor licence, but subsequently withdrew the application. 15 Mr Totaro then obtained a valuation of the Applicants' business. On 25 January 2005, he sent a letter addressed to Mr Laundy to 'Chris' at Ray White's office, stating that the Applicants were not interested in relocation of their business but that they were prepared to be bought out at a price of $800,000. Mr Totaro testified that some time after he received a reply from Mr Laundy saying that 'the price was excessive'. 16 Mr Laundy testified, however, that he did not receive Mr Totaro's letter of 25 January 2005 and he never sent a reply such as Mr Totaro claimed. He suggested that the reason why he never received the letter may have been that it was not sent to him, but (it would seem) to Mr Chris Wilkins, who was the principal of Ray White. 17 On 20 June 2005, Mr Dominic Youssef, who described himself in his affidavit as a 'managing agent', commenced employment with Ray White as an assistant to its senior property manager, Mr Damien Hawkey. His duties included contacting lessees who were in arrears with their rent. 18 All three Applicants testified that matters relating to the day-to-day administration of the business, including paying the rent and dealing with the 'paperwork', were handled on their behalf by Ms Restuccia. 19 In the second half of 2005 or the first half of 2006, Mr Youssef contacted Ms Restuccia and advised her that the Applicants should deal with him in relation to paying rent and making enquiries about the Lease. Thereafter, Ms Restuccia followed this instruction. 20 During December 2006, Mr Totaro contacted Mr Laundy by telephone and asked whether Mr Laundy was interested in buying the Applicants' business. They could not agree on a price and their discussions went no further 21 The Applicants testified that during the first two months of 2007, they discussed future developments of their business, including possible renovations. In the course of these discussions, Ms Restuccia told the other two Applicants that the Lease was coming up for renewal and that she would talk to Mr Youssef about renewing it. They indicated their consent to this course of action. Ms Restuccia testified that she was 'uncertain' as to how she should exercise the option. 22 The evidence adduced on both sides included records from telephone companies showing calls between Ms Restuccia and Mr Youssef. The parties endeavoured to identify from these records the conversations that occurred between them during January and February 2007. In preparing their affidavits, both of them misinterpreted some of the entries on these records. Having realised their errors before the hearing, they were permitted to amend their testimony orally. 23 It appeared from these records that there were ten communications of significant length (including messages left on message banks) between them: two on 8 January, two on 15 January, one on 7 February, one on 15 February, one on 19 February, one on 20 February and two on 21 February. On 21 February, there were a further two calls, each lasting only about three seconds. 24 Neither Ms Restuccia nor Mr Youssef maintained a continuing diary in which these conversations were recorded. The records of calls made by Mr Youssef from Ray White showed that he made a large number each day. On 21 February 2007, he made 24 calls, including the four just mentioned. 25 The principal role of this evidence so far as the Applicants were concerned was to support a claim by them that in the course of a telephone call Ms Restuccia communicated to Mr Youssef their desire to exercise the option to renew contained in clause 4 of the Lease and Mr Youssef indicated to her that this communication was sufficient to exercise the option. 26 Mr Youssef testified, with substantiation from a copy of a rent ledger annexed to his affidavit, that during January and February 2007 the rent due under the Lease was in arrears. To a significant degree, this was because a rent cheque for $1,827.20 deposited by Ray White on 22 December 2006 was dishonoured on 5 January 2007 and a cheque for $1,827.20 deposited on 7 February 2007 was dishonoured on 10 February 2007. The monthly rent payable at that time was $7,518.12. 27 Mr Youssef said that in all the telephone conversations that he had with Ms Restuccia during these two months he raised the matter of the arrears and told her that she must bring the rent payments up to date. He also said in cross-examination that while most of his conversations with her between January and May 2007 were about rent arrears, they also discussed repairs to the Premises. 28 Ms Restuccia claimed in affidavits sworn on 23 May and 18 September 2007 that she believed, both during January and February 2007 and at the time of swearing those affidavits, that the rent during that period of two months was overpaid. In cross-examination she agreed, however, that it was in arrears. 29 In those two affidavits, Ms Restuccia did not state that Mr Youssef raised the matter of rent arrears in their telephone conversations during this period. In an affidavit sworn on 18 April 2008 and in cross-examination, however, she said that he may have done this. 30 In her affidavits of 23 May and 18 September 2007, Ms Restuccia alleged that on 19 February 2007 she telephoned Mr Youssef at Ray White in order to advise him that the Applicants wished to exercise the option. Because he was not there, she left a message. Later that day or on the following day, he rang her back on her mobile phone while she was in David Jones's department store. They had a conversation including words to the following effect: - Ms Restuccia: We want to renew our lease. What do we do to renew the lease? Mr Youssef: Leave it with me. I will sort it out. 31 In her affidavit of 18 April 2008, Ms Restuccia stated, however, that 'she was not 100% certain that she was in David Jones' at the time of this conversation. In cross-examination, she said, following an indication given by her counsel at the commencement of the hearing, that the date of the conversation appeared from the telephone records to be 21 February 2007, not 19 February. 32 The records, supplemented by testimony from Mr Youssef and Ms Restuccia, showed that on 19 February 2007, he left a message on her voicemail, asking her to call him back. On the following day, she called him, but since he was unavailable, she left a message for him. 33 On 21 February 2007, Mr Youssef called her at about 12.30 p.m., whereupon they had a conversation lasting a little less than two minutes. In her revised version of events, this was the call, according to Ms Restuccia, in which the exchange about renewal of the Lease occurred. 34 At about 1.15 p.m.on the same day, they had a second conversation, also instigated by Mr Youssef. This lasted about 20 seconds. The two very short calls on that day, mentioned above, were at about 4.30 and 4.35 p.m. 35 According to Mr Youssef, no discussion of renewal of the Lease occurred during any conversation with Ms Restuccia during January or February 2007. He alleged instead that in the conversation at 12.30 p.m. on 21 February 2007 (which he initially said was on 19 February), the only topic was the rent arrears and that the following exchange occurred: - Mr Youssef: Elena, this is Dominic. I have still not received any cheque from you. Ms Restuccia: I will ring you back today. Mr Youssef: Make sure you ring me back urgently. 36 Mr Youssef added that, as the telephone records indicated by showing the prefix 1381 to the number of Ms Restuccia's phone, he had made the call at 12.30 from Ray White's office in such a way as to conceal his identity from the receiver. He said that he regularly did this when calling a tenant about rent arrears. 37 Mr Youssef said further that in the conversation at 1.15 p.m. on 21 February, he was 'very annoyed'. He said that he would come to the Premises to pick up a cheque. She said that he could do this. At about 5 p.m., having tried twice more to contact her, he went to the Premises and collected a rent cheque from her. 38 Ms Restuccia agreed in cross-examination that Mr Youssef 'could have' collected a rent cheque from her at that time. A copy of an extract from Mr Youssef's appointments diary, annexed to his affidavit, provides some confirmation of his claim to have visited the Premises. The rent ledger shows that a cheque for $2,506.04 was banked on the next day. 39 Ms Restuccia testified, with corroboration from Ms Totaro in her affidavit and in cross-examination, that shortly after 21 February 2007 she told Ms Totaro that she had spoken to Mr Youssef and he was 'fixing the lease up'. She said that she conveyed the same information to Mr Totaro at about the same time. His affidavit did not mention this happening, but in cross-examination he said that it did happen. 40 Between late February and April 2007, Mr Totaro and Ms Restuccia did three things that, according to their evidence, they would not have done if they had not believed that the Applicants had effectively exercised their option of renewal. 41 The first of these was that late in February, Mr Totaro approached Mr Paul Morton, a business banking manager employed by Westpac Bank, with a view to obtaining finance for the renovations that the Applicants had discussed. In a letter to Mr Totaro dated 1 March 2007, Mr Norton asked for various financial documents relating to the business, for use in making an application to the bank for finance. 42 Secondly, in late March or early April, Ms Restuccia engaged a waitress to work part time in their restaurant. 43 Thirdly, some time in April, Mr Totaro spoke to a representative of a Point of Sale System to discuss buying or leasing such a system for the restaurant. 44 On 9 May 2007, Ms Restuccia met Mr Youssef at the office of Ray White. In her affidavit of 18 September 2007, she said that she sought the meeting 'to discuss some matters in relation to the Lease' and she expected that at the meeting she would sign a new lease. In cross-examination, she said that she went to the meeting believing that they would discuss rent arrears and a CPI-based increase to the rent, but also that they were going to 'do something about' the renewal of the Lease. According to Mr Youssef, he raised the matter of rent arrears with her when arranging the meeting. 45 In this affidavit, Ms Restuccia said that their conversation at the meeting included words to the following effect: - Mr Youssef: Your lease has expired. Ms Restuccia: What are we supposed to do? Mr Youssef: Don't worry. Get your solicitor to write a letter. 46 In cross-examination, she agreed that he might also have raised the topics of rent arrears and CPI-based increases to the rent. 47 According to Mr Youssef, near the beginning of the meeting their conversation included words to the following effect: - Mr Youssef: We have to get the arrears up to date. How are we going to tackle this? What are you prepared to pay? Ms Restuccia: We will have to work out a payment program that we are able to meet and we will advise you of that program. 48 Mr Youssef said that following a discussion of rent increases he took a copy of the Lease from his file. Their conversation then included words to the following effect: - Mr Youssef: Your lease has expired on 31 March 2007. Ms Restuccia: How do I renew the lease? Mr Youssef: You need to see your solicitor. 49 Mr Youssef said that he then calculated the annual CPI-based rent increases. A copy of his handwritten notes of these calculations was annexed to his affidavit. 50 Mr Totaro testified that on the same day Ms Restuccia told him what Mr Youssef had said about the Lease. He then rang Mr Youssef. Their conversation included words to the following effect: - Mr Totaro: Dominic, what's happening with my lease? Is there a problem? Mr Youssef: No. I already told Elena she needs a letter from her solicitor and everything will be all right. Mr Totaro: Are you sure? Mr Youssef: Yeah. Don't worry. Don't worry. 51 According to Mr Youssef, their conversation included words to the following effect: - Mr Totaro: Dominic, Elena has told me that our lease has expired Mr Youssef: As I told Elena today, you will need to see your solicitor. 52 On 10 May 2007, the Applicants asked their solicitor, Mr Paul Alice, of Colquhoun & Colquhoun, to write to the Respondent and to Mr Youssef asking for a renewal of the Lease. Soon after, on the recommendation of a friend, they consulted another solicitor, Mr Damcevski, of Corporate & Civil Legal. 53 On 14 May 2007, Mr Damcevski faxed a letter in the following terms to Ray White, for the attention of Mr Youssef: - We confirm we act for Elena Restuccia, Michelle Totaro and John Totaro. We are instructed that our client renewed the Lease 8533150E in February 2007 for a further 5 years. We await the Lease documentation for execution and return to you. 54 In a letter dated 14 May 2007 to the Applicants, C P White & Sons (Burwood) advised that they acted for the Respondent, that the Lease expired on 30 March 2007, that the Applicants had not exercised the option for a further term, that in accordance with clause 12.4 of the Lease they remained in occupation as monthly tenants under a tenancy that was terminable on one month's written notice and that the Respondent would not grant a further lease. 55 On 15 May 2007, after the Applicants received this letter, Mr Totaro spoke on the telephone to Mr Laundy. According to both of them, Mr Laundy said that the Respondent had been waiting for the Applicants to renew the Lease, but they had not renewed it. When Mr Totaro said that the Applicants had been relying on 'the estate agent', who 'did nothing about it', Mr Laundy replied that they should have known not rely on estate agents and that they should have instructed their solicitor. 56 Mr Totaro then expressed concern at having only a monthly tenancy. Mr Laundy said in reply that (a) he had given the Applicants 'an extra month', but had not heard from them; (b) the matter was now out of his hands; (c) he would not leave them on the streets, but could put them in other properties that he owned; (d) he had not been getting enough rent under the Lease, since it been originally created by Mr Totaro's father; (e) the Applicants could stay on a monthly tenancy for a maximum of 12 months, but the closer it got to 'that 12 months', the more interested he would be in taking over the Premises. 57 The present proceedings were commenced on the following day, 16 May 2007. There was no further contact between any of the Applicants and Mr Laundy. Did the alleged conversation regarding exercise of the option occur? 58 The only significant factual question in dispute between the parties was whether the alleged conversation between Ms Restuccia and Mr Youssef regarding exercise of the option actually occurred. This conversation, in the terms set out at [30] above, was alleged to have occurred by Ms Restuccia and denied by Mr Youssef. It formed the sole basis for the claims made by the Applicants in these proceedings. Their counsel, Mr Zipser, acknowledged that if the Tribunal found that it did not take place, the Applicants would have no entitlement to any of the relief that they sought. 59 Mr Zipser argued that the Tribunal should prefer Ms Restuccia's testimony to that of Mr Youssef and find that the conversation did take place on 21 February 2007 as alleged by her. The reasons that Mr Zipser advanced, in summary form, were as follows: - 1. In February 2007, Ms Restuccia wanted to renew the Lease. According to the two other Applicants, she told them that she would speak to Mr Youssef about renewal. She did not try to renew it by any other means. 2. For Mr Youssef, who made many calls each day relating to leases managed by his employer, the question put to him by Ms Restcuccia regarding renewal of the Lease was much less significant than it was for Ms Restuccia. 3. Mr Youssef, who did not keep diary notes of his telephone calls, could not recollect accurately the dates, times or contents of calls between him and Ms Restuccia during January and February 2007. Moreover, he completely omitted to mention some calls (for example, one on 15 February 2007). 4. The conversation in which Ms Restuccia asked about renewal of the Lease lasted nearly two minutes, which was much longer than would be needed for the brief exchange, relating to rent arrears, that Mr Youssef described. 5. Ms Restuccia's account of her conversation with Mr Youssef at the meeting on 9 May 2007 was consistent with (a) Mr Totaro's corroborating testimony; (b) the letter written very soon afterwards by Mr Damcevski to Mr Youssef, in which it was claimed that the option had been exercised in February 2007; and (c) Mr Youssef's expectation at the meeting that, on account of her request to him made on 21 February and his response to it, the Applicants would be able to renew the Lease if they contacted a solicitor. 6. It was not surprising that at that meeting Ms Restuccia did not mention the conversation of 21 February after being told by Mr Youssef that the Lease had expired, because (a) she had shown when giving oral evidence that she was not an argumentative person and (b) according to her account of the meeting, Mr Youssef had told her not to worry about the renewal, but simply to see a solicitor 7. Soon after the meeting on 9 May 2007, and on the day following Mr Totaro's conversation with Mr Laundy, the Applicants filed their Notice of Application in the Tribunal. 8. The Applicants, when cross-examined at the hearing, showed themselves to be truthful and reliable witnesses. 60 Mr Armfield, who appeared for the Respondent, argued for the contrary finding. The reasons that he advanced, in summary form, were as follows: - 1. Both the alleged request by Ms Restuccia and the alleged response by Mr Youssef were inherently improbable. It was much more likely that (a) a lessee would speak to his or her solicitor, not to a managing agent, about renewal of a lease, and (b) a managing agent, if asked about renewal, would advise the lessee to contact a solicitor. It was relevant here that the Applicants had a solicitor at the time when the option had to be exercised. 2. The testimony of Ms Restuccia - who, together with the other Applicants, bore the onus of proof - was faulty in a number of respects. These included the following: (a) having claimed in affidavits sworn on 23 May and 18 September 2007 that she was in David Jones at the time of the important conversation on 21 February 2007, she said in her affidavit of 18 April 2008 and in cross-examination that she was not certain of this; and (b) having not mentioned in the two earlier affidavits that Mr Youssef raised the topic of rent arrears in their conversations of January and February 2007, she admitted in her latest affidavit and in cross-examination that he did raise this topic. 3. Mr Youssef's use of the prefix 1831 when he instituted the important conversation of 21 February 2007 by ringing Ms Restuccia showed that he was indeed pursuing the question of rent arrears. 4. Ms Restuccia did nothing to follow up her alleged request on 21 February 2007 in the period up to the meeting with Mr Youssef on 9 May. 5. At that meeting, she made no protest when Mr Youssef said that the Lease had expired. She did not remind him that, according to her, he had promised on 21 February to 'sort out' the matter of renewal of the Lease. 6. Although Mr Damcevski's letter of 14 May 2007 was addressed specifically to Mr Youssef, it made no claim that he had made a promise of this nature. If Ms Restuccia, in the course of instructing Mr Damcevski, had described the making of such a promise, he would have used it as the basis for the Applicants' claim to be entitled to renewal of the Lease. 61 In the Tribunal's opinion, both Ms Restuccia and Mr Youssef were truthful and reasonably reliable witnesses, generally speaking. The initial attempts made by both of them to reconstruct the sequence of telephone calls in January and February 2007 were unsuccessful because of inadequate or misunderstood telephone records and their failure to make contemporaneous diary notes. The Tribunal does not attach much importance to the fact that for this reason their oral evidence included some amending of detailed material in their affidavits. 62 Two aspects of Ms Restuccia's testimony do, however, give cause for concern. The first of these is her uncertainty as to whether the important conversation on 21 February 2007 took place while she was in David Jones. Given that she first asserted that this was the case as early as 23 May 2007, it is surprising that she felt compelled to express doubt about it subsequently. Secondly, Ms Restuccia's reluctance, as shown in her two earliest affidavits, to put on record the fact that in the telephone conversations of January and February 2007 Mr Youssef raised the topic of rent arrears demonstrates that she did not always try as hard as she might to mention all matters that might be relevant. 63 The Tribunal also attaches significance to the fact that, even on her own account of the meeting with Mr Youssef on 9 May 2007, Ms Restuccia made no significant response to his statement that the Lease had expired. It would have been natural for her to point out that, less than three months earlier, he had said, in reply to her request for renewal, 'Leave it with me. I will sort it out'. Mr Zipser emphasised, in his submissions, that renewal of the Lease was a matter of very great importance for Ms Restuccia. One would therefore have thought that, on being told by Mr Youssef that he had not kept this promise, her instinctive reaction would have been to state firmly, and possibly with a degree of exasperation, that he had made the promise and she had expected him to keep it. Mr Zipser's submission that she had shown herself not to be argumentative by nature does not, in the Tribunal's opinion, entirely explain her failure even to mention the alleged promise to Mr Youssef. 64 By the same token, the Tribunal agrees with Mr Armfield's submission that it is difficult to understand why the Applicants apparently did not instruct Mr Damcevski to make an appropriate reference to this alleged promise when composing a letter to be sent specifically to Mr Youssef. 65 There are, as Mr Zipser submitted, good reasons why Mr Youssef might have forgotten making this promise, whereas it was a matter to which Ms Restuccia attached considerable importance. But Mr Zipser's contention that the Applicants took steps between February and May 2007 (for example, hiring a new employee) that demonstrated their belief that they had exercised the option is weakened when one considers that if they had simply forgotten about the existence of the option they might well have taken the same steps. 66 Not for the first time, the Tribunal is required to reach a conclusion on a factual matter by making a difficult choice between the conflicting testimonies of two witnesses. In this situation, as Mr Armfield pointed out, it is of considerable significance that the onus of proof lies on the Applicants. 67 Taking all of the foregoing considerations into account, and making due allowance for the existence of some degree of corroboration of Ms Restuccia's version of events from her co-lessees' accounts of what she told them, the Tribunal's conclusion is that the Applicants have not discharged this onus of proof. They have not established that, on the balance of probabilities, an exchange between Ms Restuccia and Mr Youssef such as is described above at [30] occurred during a telephone conversation on 21 February 2007 or at any other time. 68 As Mr Zipser acknowledged, this finding on a strongly contested issue of fact is enough to defeat the Applicants' case in these proceedings. The Applicants' claim of estoppel 69 In view of this finding, it is strictly unnecessary for the Tribunal to determine a number of further questions on which the Applicants' claim for relief was based. 70 This claim was founded on principles of estoppel or waiver, since Mr Zipser conceded that under clause 4.4.1 of the Lease, written notice of exercise of the option was required within the stipulated period. A decision confirming this proposition, to which both Mr Zipser and Mr Armfield referred, is Universal Roofing and Accessories Pty Ltd v Singh [2004] NSWADT 32. 71 Mr Zipser submitted however that Mr Youssef's alleged statement to Ms Restuccia on 21 February 2007, responding to her notification of the Applicants' intention to exercise the option of renewal, created an estoppel precluding the Respondent from asserting that due to the lack of written notice the option had not been effectively exercised. 72 As Mr Zipser acknowledged, one of a number of propositions on which this line of argument depended was that Mr Youssef, in his capacity as an employee of Ray White, acted as an agent of the Respondent in making this statement and was authorised to bind it in so far as it gave the Applicants to believe that the Respondent did not insist on adherence to the requirement of written notice. 73 The written and oral submissions advanced by Mr Zipser and Mr Armfield contained detailed arguments on this matter, which is primarily a question of law. As well as being potentially crucial to the outcome of the case, this question is not straightforward and is of some significance in retail tenancy law. 74 For these reasons, the Tribunal will now summarise the arguments of counsel and set out its conclusions on this matter relating to the extent of Mr Youssef's authority. Did Mr Youssef's authority extend to waiving the requirement of written notice? 75 Mr Zipser contended that Mr Youssef, in his role as an employee of Ray White, had actual authority and/or ostensible authority to bind the Respondent in making the relevant statement to Ms Restuccia. 76 In submitting that actual authority existed, Mr Zipser referred to the range of authority conferred on Ray White by clauses 9 and 10 of the Agency Agreement (see above at [11]), notably by clause 9 (g) ('exercise the Principal's rights to vary or terminate the lease by services of notices as necessary'). He submitted that these clauses did not merely authorise Ray White to perform the acts described in them when specifically so instructed by the Respondent, but also at Ray White's discretion. 77 Mr Zipser submitted further that, whether or not this broad interpretation of clauses 9 and 10 was correct, they nonetheless indicated, when read in conjunction with the remaining clauses of the agreement, that by implication the agreement conferred authority on Ray White not only to receive notices of exercise of options of renewal from lessees of properties to which the agreement referred, but also to waive any requirement that renewal must be by written notice. He contended that since Ray White had been expressly identified to the Applicants as the Respondent's agent to receive rent payments, and had received a letter sent by Mr Totaro for transmission to Mr Laundy (see [15 - 16] above), it had been held out by the Respondent as authorised to exercise a sufficiently wide range of powers on the Respondent's behalf. 78 In so arguing, Mr Zipser relied first on a number of authorities, notably Setena Pty Ltd v Perpetual Trustee Nominees (Canberra) Ltd (1987) NSW Conv R 55-322, Young v Lamb [2001] NSWCA 225, Riltang Pty Ltd v L Pty Ltd [2002] NSWSC 625 and Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203, establishing that, notably when a lease contains no address for a lessor (see Young v Lamb at [36]), the management of property leased to tenants will 'ordinarily embrace the receiving of a notice from a tenant exercising an option of renewal of his lease… in the absence of proof some relevant limitation to his authority' (see Setena at 56,969). But as stated in Riltang at [14], …the agent's authority to accept service of a notice of renewal must be determined having regard to the circumstances of the case, including the terms of the lease and the part which the agent performs in the relationship between the lessor and the lessee. 79 Mr Zipser submitted further that, in such a context, the implied or usual authority of the agent will extend to permitting the lessee to give notice of exercise of an option other than in accordance with any formal requirements expressly required in the lease. In this context, he cited two further authorities, Legione v Hateley (1983) 152 CLR 406 and Frank v Brown [2000] NSWSC 290. 80 In Legione v Hateley, the solicitors for vendors of land sent a notice to the purchasers' solicitors requiring completion of the contract of sale by a fixed date, failing which the contract would be rescinded. Shortly before this date, a secretary in the office of the vendors' solicitors, Miss Williams, responded to a request by the purchasers' solicitors for a short extension of time by saying that she thought that would be 'all right' but she would have to get instructions. In the course of holding, by majority, that this response did not create an estoppel preventing the vendors from claiming that the contract had been rescinded, the High Court considered whether Ms Williams had authority from the vendors to indicate that their right to rescind would be kept in abeyance. Gibbs and Murphy JJ (at 421-422) and Mason and Deane JJ (at 437) held that she had ostensible authority to bind the vendors. At 421, Gibbs and Murphy JJ said: - It is of course clear that neither the solicitors, nor Miss Williams, had any actual authority from the vendors to make any representation to the purchasers that the vendors' rights would be kept in abeyance. But the vendors had authorized the solicitors to act for them in completing the sale. Within reasonable limits, the solicitors, having been entrusted by the vendors with the conduct of the negotiations, must be treated as having the authority which, within the course of the negotiations, they purported to exercise:… It was of course the conduct of the vendors that gave the solicitors ostensible authority to act on their behalf. The authority extended to actions carried out in the ordinary course of business by such members or employees of the firm as ordinarily acted for it. When the solicitors selected or permitted Miss Williams to speak on their behalf, in their capacity as solicitors for the vendors, her words bound the vendors. 81 In Frank v Brown, an employee of an estate agent engaged by a vendor of land gave a positive response to a request, made by a bank manager on behalf of the purchasers, to replace the cheque paid for the deposit at the auction sale with a combination of a cheque and a bond. Clause 2.7 of the contract of sale provided that the vendor might accept a bond or guarantee as part of a deposit. In holding that the estate agent had authority to bind the vendor in agreeing to this substitution, Bergin J said (at [58 - 61]): - [58] Apparent or ostensible authority of the agent is authority as it appears to the plaintiffs regardless of any limit on the agent's authority agreed as between the defendant and the agent:… [59] The agent was presented to the plaintiff as the defendant's agent and the deposit holder with responsibility to invest the deposit pursuant to cl3 of the contract. Additionally, on the night of the auction the agent negotiated with the plaintiffs for the purpose of reaching an agreement in respect of the extended settlement. After the auction was completed and the plaintiffs paid the original deposit cheque of $115,000 a receipt was issued by the agent for that cheque. After contracts had been exchanged the agent informed the plaintiffs to contact it if there was "anything you want to know about the property". [60] When the plaintiffs' banker approached the agent to replace the original cheque with a cheque and bond, no indication was given to the plaintiffs or their banker that the agent did not have authority to accept the bond and the replacement cheque. Indeed the indication was quite the opposite with the agent indicating that such arrangement was "fine"… [61] In all the circumstances of the conduct of the agent I am satisfied that the plaintiffs have proved that the agent had the ostensible authority to accept the bond pursuant to clause 2.7 of the contract. I am satisfied that such acceptance occurred. 82 In response to these submissions, Mr Armfield appeared not to dispute the proposition that Ray White had authority from the Respondent to receive a written notice of exercise of the option contained in the Lease. He argued, however, that neither the Agency Agreement nor any conduct by the Respondent conferred on Ray White any authority, actual or ostensible, to vary the contract contained in the Lease by dispensing with the requirement that such a notice must be in writing. 83 With regard to clause 9(g) of the Agency Agreement, Mr Armfield's submission was that it went no further than to authorise Ray White to serve a notice terminating or varying a lease when so instructed by the Respondent. This clause, he said, clearly did not empower Ray White to vary a lease - for example, by reducing the rent - as it thought fit, without any need to receive instructions from the Respondent. 84 Mr Armfield submitted also that, according to the uncontested evidence of Mr Laundy, the Respondent did not by express words extend the authority conferred on Ray White. Furthermore, the Respondent did not hold Ray White out as possessing any authority beyond that set out in the Agency Agreement. No holding out arose simply because Mr Youssef presented himself as the person with whom the Applicants should deal in matters such as rent or repairs, or because on one occasion Ray White received from Mr Totaro a letter addressed to Mr Laundy. Indeed, the fact that on two occasions (see [14] and [20] above) Mr Totaro dealt directly with Mr Laundy with regard to a possible sale of the Applicants' business to the Respondent demonstrated that the Applicants did not regard Mr Youssef or Ray White as their sole point of contact with the Respondent. 85 In addition to commenting on some of the cases cited by Mr Zipser, Mr Armfield relied on the decision in Markson v Cutler [2007] NSWSC 1515. In that case, a real estate agent acting for vendors of land, Mr Finger, indicated to the purchaser, Mr Markson, that the vendors (the Cutlers) would be prepared to accept a deposit of 5% of the sale price, instead of the usual 10% as stipulated in the contract. He had no instructions from the vendors to do this. Having discovered that a deposit of only 5% had been paid, the vendors terminated the contract on this ground. In the course of holding that they were entitled to do so, Brereton J dealt as follows (at [7 - 10]) with the question of the agent's authority to bind the vendors in accepting the reduced deposit: - [7] There is no doubt that Mr Finger had the usual authority of a real estate agent acting for a vendor on a sale. However, appointment as a real estate agent does not confer authority to bind the vendor to anything. A real estate agent has authority to find a purchaser, not to bind the vendor to terms with the purchaser. So much is made clear by high authority… Moreover, that an agent is authorised to receive a deposit - and, similarly, that the contract directs payment of the deposit to the agent - does not confer on a real estate agent authority to bind the vendor in dealings in respect of the deposit, but only authority to receive it in accordance with the terms of the contract… [8] Accordingly, it is only if Mr Finger or his firm had express or ostensible authority to accept a five per cent deposit that the Cutlers would be bound by his conduct. So far as ostensible authority is concerned, an agent cannot by its own acts cloak itself with authority wider than the usual authority of an agent of the relevant class; some holding out or representation by the principal to cloak the agent with the relevant authority is required. The agent cannot create its own authority. Insofar as the judgment of Bergin J in Frank v Brown [2000] NSWSC 290; (2000) 10 BPR 18,119 at [58]-[61] - which was invoked by Mr Murr - suggests otherwise, it would seem, with the greatest respect, to be inconsistent with well-established principle… Accordingly, no matter what Mr Finger himself did or said during and before 17 April, that could not confer on him ostensible authority wider than a real estate agent's usual authority, unless he was held out as having that wider authority by the Cutlers. No representation or conduct by the Cutlers, to Mr Markson or generally, has been identified that would cloak Mr Finger or his firm with ostensible authority wider than the usual scope of a real estate agent's authority. [9] For Mr Markson, it has been argued that a distinction is to be drawn between authority to bind a vendor, and authority to communicate a vendor's position. There is no doubt that a real estate agent generally, and in this case Mr Finger in particular, has authority to communicate the negotiating position of his principals, in this case the Cutlers; but a communication of a negotiating position is not one that gives rise to legal relations; it is not the communication of an offer capable of immediate acceptance…. [10] Accordingly… such acceptance required more than mere communication of a negotiating position; it required an act which would bind the vendor to something other than or additional to the term contained in the contract, in substance equivalent to variation of a contract. Authority to communicate the negotiating position of the vendor to the purchaser does not include authority to vary a contract. In short, if the contract contemplated the vendor might choose to accept a deposit other than 10%, that does not confer on the agent authority to make that decision. The agent's acceptance of a five per cent deposit could only bind the vendor if he were authorised to do so, and a real estate agent does not, absent special circumstances, have such authority. 86 At [20 - 21], his Honour held that one reason why the doctrine of promissory estoppel could not apply so as to prevent the Cutlers from terminating the contract was that Mr Finger had no authority to bind them in accepting the reduced deposit. In so holding, he distinguished the High Court's ruling in Legione v Hateley (1983) 152 CLR 406 (see [80] above), pointing out that it related to the authority of solicitors acting for a vendor to bind their client 'within reasonable limits' on account of having been 'entrusted by the vendors with the conduct of the negotiations'. 87 Mr Armfield argued that for the same reasons the ruling in Legione v Hateley was not applicable to these proceedings. He also drew the Tribunal's attention to the fact that in the passage just quoted from Markson v Cutler, Brereton J expressed doubts as to the correctness of Bergin J's observations in Frank v Brown, quoted above at [81]. 88 In the Tribunal's opinion, the contentions advanced on this matter by Mr Armfield are correct. Ray White and any person employed by it may well have had authority to receive from the Applicants a written notice exercising the option to renew the Lease. But they had no authority - actual, usual or ostensible - to bind the Respondent to a waiver of the requirement, set out in clause 4.4.1 of the Lease, that such notice must be in writing. Their authority did not extend to varying the agreement between the parties in this way. It follows that no estoppel precluding the Respondent from insisting on this requirement could arise from what Mr Youssef allegedly said to Ms Restuccia on 21 February 2007. 89 The Tribunal would add the following observations on this matter. The requirement of writing in a clause relating to the exercise of an option to renew a lease has two important functions, amongst others. One of these is to reduce the incidence of disputes, such as has arisen in this case, as to whether the option has in fact been exercised. 90 The other is to ensure that the lessor has an opportunity, relying on provisions such as clause 4.4.2 and 4.4.3 of the Lease in the present case, to refuse, if so entitled, to grant a new lease on the ground that rent is unpaid or some other obligation of the lessee has not been discharged. A lessor who wishes to exercise this right of refusal must first serve on the lessee a notice as required by section 133E of the Conveyancing Act 1919. Evidently, a lessor will not comply with this provision if he or she is unaware that the lessee has purported to exercise the option. As the facts of the present case suggest, the likelihood of the lessor being unaware would be increased if it were held to be within the usual authority of a managing agent to dispense with the requirement of writing for the notice of exercise of the option and to indicate to the lessee that oral notice was sufficient. A careless agent, having given such an indication to the lessee, would deprive the lessor of any entitlement to refuse a new lease if the agent then omitted to inform the lessor of these events. It is indeed conduct of this nature that the Applicants alleged against Mr Youssef. 91 It is a principle of the law of agency that an agent is required at all times to act in the best interests of his or her principal. To hold that, in this particular situation that arises from time to time in leasing situations, a managing agent ordinarily has authority to bind the lessor in a way that is potentially highly detrimental to the lessor's interests and does not appear to have any countervailing benefits would seem to the Tribunal to contravene this principle. 92 It follows from this reasoning that, even if the Tribunal had found in the Applicants' favour with regard to what Mr Youssef said to Ms Restuccia on 21 February 2007, it would still be inclined to dismiss their claim on the ground that Mr Youssef had no authority to dispense with the requirement of written notice. Further aspects of the Applicants' claim 93 Mr Armfield argued also that a further reason why no estoppel could have arisen against the Respondent from Mr Youssef's alleged statement on 21 February 2007 was that the statement contained no representation by or on behalf of the Respondent. While not needing to resolve this question, the Tribunal is inclined to the view that there was a sufficient representation to the effect that the Applicants need not do anything further to exercise the option. 94 A further submission by Mr Armfield was that Mr Youssef, in making the alleged statement, adopted the role of an agent for the Applicants in exercising the option on their behalf. In the Tribunal's opinion, this submission has merit but requires no determination. It was not significantly discussed in counsel's arguments. 95 Finally, we agree with a submission by Mr Armfield (which Mr Zipser did not specifically address) that it was not unconscionable of the Respondent, either at general law or under the unconscionable conduct provisions of the RL Act, to refuse to grant a new lease to the Applicants on the ground that they had not complied strictly with the Lease's requirements regarding exercise of the option. Mr Armfield relied here on the Supreme Court's decision in Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd [2000] NSWSC 459 and the Tribunal's decision in Awad v Bucasia Pty Ltd [2003] NSWADT 247. Costs 96 Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

Restuccia & Ors v Entasil Pty Ltd

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