HEARD : 15-17 AUGUST, 5-8 SEPTEMBER, 14 OCTOBER 2005

BETWEEN : SECURE PARKING (WA) PTY LTD (ACN 073 500 160)

Lease - Assignment - Consent to assignment - Admissibility of pre-contractual and post-contractual conduct - Estoppel - Implied consent - Implied terms - Prevented fulfilment - Collateral agreement - Unreasonable withholding of consent

Property Law Act 1969 (WA), s 11

Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47

Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406

Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68

Massart v Blight [1951] HCA 20; (1951) 82 CLR 423

Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) [1979] EWCA Civ 2; [1979] 1 WLR 1397

Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235

Property & Bloodstock Ltd v Emerton [1968] 1 Ch 94

Welch v Birrane (1974) 29 P & Cr 102

Wilson v Jolly (1948) 48 SR (NSW) 460

Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485

Equitable Life Assurance of the United States v Bogie [1905] HCA 55; (1905) 3 CLR 878

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385

Freshmart Ltd v Mercantile Mutual Insurance (Australia) Ltd [1994] 2 Qd R 390

Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418

Glenochil, The (1896) P 10

Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd [1929] AC 223

Gregory & Bradshaw v MAB Pty Ltd (1989) 1 WAR 1

Hyde v Pimley & Ors (1952) 2 QB 506

Immer (No 145) Pty Ltd v the Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26

K C Park Safe Pty Ltd v Triple 7 Nominees Pty Ltd, unreported; SCt of Vic; Library No 5254; 13 February 1996

Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406

Lewis v Cook [2000] NSWSC 191; (2000) 18 ACLC 490

Mahoney v Lindsay (1980) 33 ALR 601

Maynard v Goode [1926] HCA 4; (1926) 37 CLR 529

Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723

Newmont Pty Ltd v Laverton Nickel NL [1983] 1 NSWLR 181

Parker v Jones [1910] 2 KB 32

Sumampow v Mercator Property Consultants Pty Ltd [2005] WASCA 64

1 LE MIERE J: This action is concerned with the lease of the Esplanade car park situated at a property at The Esplanade, Perth.

2 The property is owned by the second defendant and its wholly owned subsidiary company, Esplanade Lodge Pty Ltd. Esplanade Lodge operates the New Esplanade Hotel at the property.

3 On 19 October 1995 the second defendant leased the Esplanade car park to the first defendant for a period of five years commencing on 19 October 1995. The lease contains an option to take a further lease of the car park for two further terms of five years commencing on 19 October 2000 and 19 October 2005 respectively.

4 The first defendant operated the car park business under the business name "Panda Parking". The only business that Panda Parking engaged in was the operation of the Esplanade car park.

5 Brett and Garth Matthews, who I will refer to as Brett and Garth, are brothers who operate an Australia wide and international car parking business as The Secure Parking Group.

6 Brett and Garth are the principal shareholders of Auspark Holdings Pty Ltd, which Brett described as the plaintiff's parent company. The Matthews brothers or Auspark caused the plaintiff to be incorporated in Western Australia on 1 April 1996.

7 I will now refer to some of the relevant terms of the Esplanade car park lease. Clause 8 is concerned with assignment and subletting. I will refer to the terms of that clause, in so far as they relate to assignment. Clause 8.1 provides that the lessee shall not, without the prior consent in writing of the lessor, assign the leased premises and the lessor shall not unreasonably withhold its consent to an assignment if the conditions, requirements or provisions of paragraphs (a) to (e) are met. Paragraph (a) provides that the lessee proves to the satisfaction of the lessor that the proposed assignee is a respectable, responsible and financially acceptable solvent person capable of performing the obligations of the lessee under the lease and adequately carrying on the business. Paragraph (b) provides that the lessee has executed and procured the execution of an assignment of the lease by the proposed assignee and by such guarantors as are required pursuant to par (c) and to which the lessor is a party and which is in a form prepared by the lessor's solicitors. Paragraph (c) provides that where the proposed assignee is a corporation then the lessor shall be entitled to require a personal guarantee by all or any of the directors or principal shareholders of the corporation or of its parent corporation (if any) of that corporation's due performance of the lease. Paragraphs (d) and (e) are not relevant to the issues in this case.

8 Additional provisions are set out at Item 9 of the Schedule to the lease. Item 9(2) provides that the lessee shall from time to time nominate ten car parking bays for the use without payment of customers and invitees of the hotel business operated by the lessor from the building and the lessee may vary the car parking bays so nominated from time to time.

9 In late 1995 Brett and Garth spoke with the first defendant's father, Lawrence Wilson, about the Esplanade car park.

10 On 1 December 1995 Garth wrote to Lawrence Wilson and stated that he and his brother Brett were interested in forming a joint venture for Perth. In March or April 1996 there were further discussions between Brett and Garth and Lawrence Wilson.

11 The first defendant had a telephone discussion with Garth during which Garth said words to the following effect. First, the plaintiff would purchase a 50 per cent interest in the business of Panda Parking from the first defendant for the sum of $150,000. Secondly, the plaintiff would employ the first defendant on mutually acceptable terms as the general manager of the plaintiff in Western Australia. Thirdly, Auspark would grant the first defendant an option to purchase 50 per cent of the issued shares in the plaintiff for the sum of $75,000. The first defendant then had conversations with Brett. During one of these conversations Brett asked the first defendant to approach the second defendant about getting the second defendant's consent to an assignment of the lease of the Esplanade car park from the first defendant to the plaintiff.

12 Mr Michel was a director of, and the secretary of, the second defendant. In early April 1996 the first defendant met with Mr Michel and discussed proposals involving the plaintiff acquiring an interest in the Esplanade car park or its operation. At a meeting on 17 April 1996 between Mr Michel, the first defendant and Lawrence Wilson, the first defendant informed Mr Michel that he intended to proceed with a proposal for the lease to be assigned to the plaintiff. Mr Michel's notes of the meeting say that following discussion it was agreed that the first defendant would proceed to have prepared the assignment of lease to the plaintiff. The note also refers to some discussion concerning aspects of hotel guests parking in the car park and the original determination of "give and take" car bays and says that it was agreed to review the position in two weeks.

Negotiations concerning assignment of lease

13 On 11 April 1996 Mr Michel wrote to the first defendant. The letter referred to the first defendant's request to assign the Esplanade car park lease to a company to be created and that the new company shareholding would change to allow "Secure Parking" to acquire a 50 per cent interest in the first defendant's company. Mr Michel stated that the second defendant saw no problem in the arrangement subject to two provisos. The first was that the guarantors are in place and that there is no further breach of the terms and conditions of the lease. The second was:

"That the give and take usage of bays by Hotel Guests and Invitees continues ie 'There is no charge/adjustment where Hotel Guests and Invitees Exceed or do not Exceed 10 Car Parking Bays'."

14 On or about 15 April 1996 the first defendant instructed Mr Lyons, a solicitor, to act on his behalf in relation to the purchase by the plaintiff of a 50 per cent interest in the first defendant's business "Panda Parking". The first defendant instructed Mr Lyons to prepare an assignment of the lease of the Esplanade car park from the first defendant to the plaintiff. The first defendant also instructed Mr Lyons to confer directly with the plaintiff's solicitor, Stuart Raward, in Sydney.

15 Mr Lyons prepared a draft deed of assignment and sent the draft deed to Mr Raward under cover of a letter dated 19 April 1996. The covering letter stated that the first defendant had instructed Mr Lyons that the second defendant had agreed to the assignment of the lease to the plaintiff, conditional upon the directors of the plaintiff guaranteeing the lease obligations.

16 On 26 April 1996 Mr Raward sent a facsimile letter to Mr Lyons concerning the draft deed of assignment. Mr Raward said that Brett and Garth would offer personal guarantees limited to three months' rent or the corporate guarantee of the plaintiff, whichever the second defendant felt most comfortable with. Mr Raward further said that the first defendant should remain liable for the performance of the lessee and that the first defendant would be managing the plaintiff's business in Western Australia and would ultimately own half of that business.

17 In late April 1996 Brett telephoned the first defendant and said words to the effect that Brett and Garth were only prepared to provide personal guarantees limited to three months' rent and asked whether the first defendant would agree to remain as a guarantor of the lease if it was assigned to the plaintiff. The first defendant said that he would seek legal advice on the matter. In early May the first defendant communicated the substance of what Brett had told him to Mr Michel.

18 On 21 May 1996 Mr Michel wrote to the first defendant. Mr Michel said that as the first defendant was unable to obtain personal guarantees from the directors of the plaintiff, the proposed assignee, the second defendant proposed certain "variations" to enable the assignment to take place. One "variation" was that there be a corporate guarantee by the plaintiff together with a continuing personal guarantee of the first defendant. Another "variation" was that the provision of free bays to hotel guests and invitees be on a give and take basis "whereas the hotel may have more or less than 10 bays at any one time but not more than 20, determined by [the second defendant]". A further proposed variation was that any variation from the current 148 car bays be the lessee's responsibility. There were other proposed variations. Mr Michel said: "The drafting of these variations will be left to our solicitors subject to your prior agreement".

19 After sending his letter of 21 May 1996 to the first defendant Mr Michel was telephoned by Mr Raward in relation to that letter. On or about 27 May 1996 Mr Michel received a letter of 27 May 2005 from Mr Raward. Mr Raward said that he acted for the plaintiff and was replying to the second defendant's letter of 21 May 1996 to the first defendant. Mr Raward said that the plaintiff would offer a corporate guarantee of the lease and Brett and Garth would offer a guarantee limited to three month's rent and that the first defendant had been requested to continue to guarantee the lease as outgoing lessee. Mr Raward said to see the attached letter from the first defendant in regard to the management of the hotel bays and that in all respects the lease was to remain on its current terms and conditions. The attached letter from the first defendant was a copy of an unsigned letter of 24 May 1996 from the first defendant to Mr Michel. In that letter the first defendant referred to "the present agreed method of charging a flat rate of $20 for each bay exceeding the 10 bay limit". Mr Wilson said that he was prepared to waive the March account and proposed a new method of charging for hotel guest parking. The proposal was that in the event that hotel parking exceeds the 10 bay limit as contained within the lease the second defendant would only be charged for bays occupied between 11 am and 4 pm at the market rate of $20 per hour. It was proposed that should a hotel guest check out of the hotel on any given day (excluding weekends) and remain in the car park after 11 am the first defendant would charge the hotel guest at the market rate per hour from 11 am to the time the guest left the car park. I observe that that proposal is different from and inconsistent with the variation proposed by Mr Michel in his letter of 21 May 1996 to the first defendant in relation to the use of car bays by hotel guests and invitees.

20 On 27 May 1996 the first defendant wrote to Mr Michel. That letter is in the same terms as the unsigned copy letter from the first defendant to Mr Michel of 24 May 1996 enclosed with Mr Raward's letter of 27 May 1996 to Mr Michel, to which I have already referred.

21 On 20 June 1996 there was a telephone conversation between Mr Michel and Mr Raward concerning the proposal by Secure Parking that the Esplanade car park lease be assigned to the plaintiff on the basis set out in Mr Raward's letter of 27 May. On 20 June 1996 Mr Michel wrote to Mr Raward. Mr Michel's letter said:

"Following our discussions this morning, [the second defendant] is prepared to forego its entitlement under the lease CL 8.1(c) providing that,

(a) Secure Parking Pty Ltd ACN 002 041 581 provides a corporate guarantee, Brett and Garth Matthews provide personal guarantees for a three month period and Alf Wilson [sic] guarantee is ongoing.

(b) A give and take usage of bays by Hotel Guests/Invitees continues, ie 'there is no charge/adjustment where the Level Exceeds 10 or is less than 10'.

(c) There is no variation sought to the 148 Bays Leased."

I will refer to the provisions in pars (a) to (c) of that letter collectively as the second defendant's Assignment Requirements and to each of par (a), (b) or (c) as Assignment Condition (a), Assignment Condition (b) and Assignment Condition (c) respectively.

Second defendant allegedly consents to the assignment

22 On 21 June 1996 Mr Raward telephoned Mr Michel. Mr Michel's evidence of the conversation is as follows. Mr Raward enquired whether Mr Michel had sent him a proposal regarding the assignment of lease in the terms they had discussed. Mr Michel informed Mr Raward he had. Mr Raward said he had not received it. Mr Michel informed Mr Raward of the second defendant's offer as outlined in Mr Michel's letter of 20 June 1996. Mr Raward asked Mr Michel to confirm that the second defendant would assign the lease with limited guarantees upon acceptance of its terms by the plaintiff. Mr Raward asked Mr Michel to put a note on the bottom of a copy of the offer to this effect and fax it to him immediately. Mr Michel did so.

23 Mr Raward's evidence is that he had received Mr Michel's letter of 20 June 1996 before he telephoned Mr Michel on 21 June. Mr Raward said that he rang Mr Michel and said to him that the letter of 20 June "didn't get us there". Mr Raward asked Mr Michel to confirm that the second defendant was willing to consent to the assignment. Mr Michel said it would.

24 Both Mr Michel and Mr Raward unsurprisingly said that they were unable to recall the words of the conversation. Neither was able to put the conversation into direct speech. I do not place any reliance upon the words used by either of them to describe the conversation.

25 After the telephone conversation Mr Michel made a handwritten note on the bottom of a copy of his letter of 21 June 1996 and sent it by facsimile to Mr Raward. The handwritten note says: "On the above basis the landlord agrees to the assignment". It is signed by Mr Michel and dated 21 June 1996. This is the note that the plaintiff says constitutes the second defendant's consent to the assignment of the lease.

26 The first defendant gave evidence that on 21 June 1996 he received a telephone call from Garth. Garth said words to the effect:

"Stuart Raward has received a letter by fax today from Richard Michel. Nullagine is prepared to accept limited personal guarantees from me and Brett provided Secure gives a corporate guarantee, the lease is varied to provide that there is no limit to the free bays that are made available to guests in the Esplanade Hotel and that you remain liable as a guarantor. ... It would be economically disastrous to agree to unlimited bays because the costs of the car park are fixed and the car park revenue would decline if the hotel uses more than the 10 bays provided for in the lease."

27 The first defendant says that he said words to the effect that he agreed there should be no increase over 10 bays. Garth then said words to the effect:

"The purchase price of $150,000 is due to be sent today to the trust account of Barry Chester & Hick. Given that Nullagine has not consented to the assignment, Secure needs a letter from you granting Secure management rights in relation to the operation of the car park."

28 The first defendant said that at least an hour later he received a telephone call from Brett during which Brett dictated to him the words he wanted included in the letter. The first defendant said he wrote the words down and said he would send Brett the letter. The first defendant then typed the letter dictated to him by Brett and dated it 21 June 1996 addressed to "Secure Parking Group". The first defendant says he sent it by facsimile to Brett on 24 June 1996. That is confirmed by the facsimile transmission imprint on the letter. The first defendant said that during the same telephone conversation with Brett, Brett said words to the effect: "Please sign the deed of assignment that Paul Lyons has prepared and send a copy to Stuart Raward".

29 The letter dated 21 June 1996 from the first defendant addressed to Secure Parking Group reads as follows:

"Re: 18 The Esplanade Car Park Perth

I hereby confirm and agree that until as [sic] the transfer of lease of the abovementioned car park is formally consented to by the lessor, Nullagine Investments Pty Ltd, I hereby grant to your company all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to your company provided that the agreed sum of one hundred and fifty thousand dollars ($150,000) is paid into the trust account of Barry Chester & Hick Pty Ltd on or before 25 June 1996.

Upon receipt of the aforesaid income and revenue as agreed, your company will be entitled to direct me manage [sic] the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions.

The above agreement is to come into effect on or before the 25th June 1996 or such other date prior to the 30th June 1996 that the parties agree to in writing."

30 After receiving the first defendant's letter dated 21 June 1996 the plaintiff paid $150,000 for the credit of the first defendant. On 25 June 1996 the first defendant signed a copy of the deed of assignment that Mr Lyons had prepared. It had not then been executed by any other party. On 25 June 1996 Mr Lyons sent the deed of assignment executed by the first defendant together with a covering letter to Mr Raward.

31 On 25 June 1996 the plaintiff took over the day to day management and operation of the Esplanade car park. From that date all income and revenue from the car park was paid into the plaintiff's bank account and the plaintiff paid all outgoings such as rent and electricity.

32 On 26 June 1996 the first defendant executed a service agreement whereby he was appointed general manager of the plaintiff commencing from 26 June 1996. Also on 26 June 1996 Auspark granted to the first defendant a written option to purchase 50 per cent of the issued shares in the plaintiff for the sum of $75,000.

Subsequent discussions concerning the Deed of Assignment

33 On 12 July 1996 Mr Raward wrote to Mr Michel enclosing the deed of assignment for execution by the second defendant. The deed had been signed by the first defendant and executed by the plaintiff. The document executed by the plaintiff had in cl 2.1 some handwritten words which were not in the deed at the time it was signed by the first defendant.

34 Mr Michel received the deed of assignment signed by the first defendant and executed by the plaintiff on or about 12 July 1996.

35 On 23 July 1996 Mr Lyons wrote to Mr Raward stating that the first defendant was seeking the immediate return of the executed assignment documents and requested their return.

36 On 12 August 1996 the second defendant's solicitors, Jackson McDonald, sent a facsimile letter to Mr Raward. The facsimile referred to Mr Raward's letter of 12 July to Mr Michel, that is the letter enclosing the deed of assignment executed by the plaintiff and signed by the first defendant. Jackson McDonald stated that "while the assignment of lease document addresses points (a) and (c) of our client's letter to you of 20th June, no provision deals with point (b) in that letter". Jackson McDonald went on to propose that a clause be inserted in the deed varying Item 9(2) of the lease.

37 Mr Raward did not respond to Jackson McDonald's facsimile. On 4 September 1996 Jackson McDonald sent a facsimile to Mr Raward referring to their fax of 12 August and enquiring as to Mr Raward's response. Mr Raward did not respond to Jackson McDonald.

38 On 4 October 1996 the second defendant wrote to the first defendant concerning compliance by the first defendant with terms of the lease and asking the first defendant to advise "the current position on the assignment of lease to Secure Parking (WA) Pty Ltd". On 11 October 1996 the second defendant again wrote to the first defendant concerning compliance with terms and conditions of the lease.

39 On 8 November 1996 Mr Lyons wrote to Mr Raward repeating his request in his letter of 23 July 1996 that the assignment documents be returned to him.

40 On 11 November 1996 Mr Raward sent a facsimile letter to Mr Lyons. Mr Raward said that the executed assignment of lease (in triplicate) had been forwarded directly to the second defendant on 12 July 1996. Mr Raward continued:

"We have spoken to Mr Michel on several occasions since then regarding the arrangements for parking with the hotel, of which Alf Wilson is aware. We are of the view that there is no impediment nor should there be one, to the lessor executing the lessor's consent and returning the leases to us."

41 Mr Lyons then wrote to the second defendant on 11 November 1996. Mr Lyons said that he had been advised by Mr Raward that the assignment documents had been forwarded to the second defendant for execution on 12 July 1996 and asked whether the documents had been received and if so whether or not the second defendant had executed the documents.

42 On 26 November 1996 Jackson McDonald sent a facsimile letter to Mr Lyons. Jackson McDonald stated that they were instructed:

" ... that our client's agreement to the proposed assignment to Secure Parking (WA) Pty Ltd was conditional upon proposed variations to nominated car parking bays for the use of our client's hotel business conducted from the Building. Our client required resolution on this point before being prepared to accept the limited personal guarantees of Garth and Brett Matthews. ... We have again today faxed to the solicitor acting for Secure Parking (WA) Pty Ltd to seek an early resolution."

43 On the same day, 26 November 1996, Jackson McDonald sent a facsimile letter to Mr Raward stating that their client:

"still requires resolution of the proposed new arrangement with respect to nominated car parking bays for use associated with out client's hotel business, before it will accept the proposed terms of assignment and, in particular, the limitations on the personal guarantees of Garth and Brett Matthews."

44 On 27 November 1996 the second defendant wrote to the first defendant concerning compliance with provisions of the lease and requesting that the first defendant obtain confirmation of trading figures from Barry Chester & Hick. It appears that the trading figures are relevant to the percentage rent payable by the lessor in addition to the base rent payable under the lease.

45 On or about 29 November 1996, the first defendant provided to the second defendant an audit report by Barry Chester & Hick in relation to the statement of gross revenue of the car park for the year ending 18 October 1996. The report stated that it had been prepared for the purpose of fulfilling the lessee's financial reporting requirements under the terms of the lease.

46 The first defendant said in evidence that on 10 February 1997 Brett telephoned him and said words to the effect:

"The assignment to Secure is obviously not going ahead. Can you please send me a letter confirming that Secure has been granted management rights over the car park and granted the rights to receive all income and revenue from the car park."

The first defendant said words to the effect: "I have already provided a letter". Brett said words to the effect: "It doesn't matter, I need another letter". The first defendant said that Brett then dictated to him the letter that Brett wanted him to send and the first defendant wrote down the words dictated by Brett. After the phone call the first defendant typed the letter dictated by Brett, signed it and sent it to Brett. The first defendant's letter of 10 February 1997 to the plaintiff reads:

"18 THE ESPLANADE PERTH - 144 BAY CAR PARK

I hereby confirm and agree that until such time as the transfer of lease of the abovementioned car park is formally consented to by the lessor, Nullagine Investments Pty Ltd, I hereby grant to your company all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to your company.

Upon receipt of the aforesaid income and revenue as agreed, your company will be entitled to direct me to manage the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions."

47 I find that there was a telephone discussion between Brett and the first defendant on or about 10 February 1997. I find that Brett did request that the first defendant send him a letter broadly in the terms of the letter the first defendant subsequently sent. I do not place any reliance on the first defendant's description of the words spoken by Brett, particularly words to the effect "the assignment to Secure is obviously not going ahead".

48 The first defendant says that on or about 11 February 1997 he informed Mr Michel that because an assignment was still to be finalised he had granted the plaintiff management rights in respect of the car park including the right to receive all income and revenue.

49 On 13 February Mr Michel wrote to the first defendant referring to insurance and indemnity, cl 4 of the lease. Clause 4 of the lease requires the lessee to indemnify the lessor against all claims and losses et cetera and obliges the lessee to effect certain insurance. The second defendant's letter referred to the assignment of the lease not being finalised and said that it would be prudent for the first defendant to arrange the insurance coverage required by the lease.

50 On 18 February 1997 the first defendant wrote to the second defendant referring to his previous request that the second defendant consent in writing to assign the lease to the plaintiff. The first defendant continued:

"You have indicated that you would grant approval to this assignment only on the basis that the free of charge hotel bays which are currently 10 be increased to 20.

Under the assignment clause, the lessor shall not unreasonably withhold its consent and as this request for additional free bays would upset my ability to meet my rental commitment under the lease, I classify this request to be unreasonable.

Therefore I am left with no other alternative than to withdraw my request for an assignment unless the lessor grants such an assignment to Secure Parking (WA) Pty Ltd reasonably without any conditions attached.

In the meantime I have entered into a management agreement with Secure Parking who will handle the day to day operations of the car park under the strict supervision of myself."

51 Brett and Garth gave evidence that they did not receive or see the letter of 18 February 1997, or any copy of it.

52 On 27 February 1997 the second defendant wrote to the first defendant stating that it remained prepared to grant approval to the assignment providing the essential terms of the lease - assignment and sub-letting provisions were complied with. The second defendant referred to the first defendant's arrangement with Secure Parking and stated:

"We suggest that you provide us with a copy of the Management Agreement so that we can be assured that you have not parted with possession."

53 On 19 March 1999 the first defendant exercised the option to acquire 50 per cent of the issued shares in the plaintiff and approximately two weeks later paid Auspark the sum of $75,000. The first defendant became a director of the plaintiff on 14 September 1999.

54 The first defendant gave evidence that on or about 5 May 2000 Mr Raward telephoned him and said words to the effect:

"The lease for the Esplanade expires in October this year. You have to exercise the option to renew between six and three months prior to it expiring."

"Do you want me to act on your behalf and exercise the option?"

The first defendant said yes. Mr Raward then confirmed that he would send a letter on the first defendant's behalf exercising the option to the lessor.

55 I do not accept that Mr Raward said to the first defendant: "Do you want me to act on your behalf and exercise the option" or words to that effect but I find that Mr Raward did seek and obtain the first defendant's agreement that Mr Raward exercise the option.

56 On 5 May 2000 Mr Raward wrote to the second defendant. The letter said that it was "Re: Alfred Karl Wilson Lease from Nullagine Investments Pty Ltd, Lease: The New Esplanade Hotel Car Park - Exercise of Option". The letter stated:

"In accordance with clause 2.2 of the Lease our client hereby gives formal written notice of exercise of option for a further term of the Lease commencing on 19 October 2000 for five years."

57 On 23 May 2000 Brett wrote to Mr Michel stating that, as discussed, he would appreciate formalising the assignment of the lease to the plaintiff and that they were prepared to provide a corporate guarantee from the parent company, Auspark, and further personal guarantees from Brett and Garth for three months rent. Mr Michel does not appear to have replied to Brett but wrote instead to the first defendant on 15 June 2000 saying, amongst other things, that "the second defendant had no objection to the assignment provided the assignment mirrored the existing lease, particularly with regards to personal guarantees".

58 On or about 19 October 2000 Mr Michel entered into an agreement on behalf of the second defendant with the first defendant to extend the lease for a further term of five years. A document headed "Deed of Extension of Car parking Lease" was executed by the second defendant and the first defendant and commenced on 19 October 2000.

59 On 11 May 2001 Mr Raward sent a facsimile letter to Mr Michel confirming that he was instructed by the plaintiff to seek a formal assignment of the leasehold estate to the plaintiff. Mr Michel did not reply to Mr Raward but wrote to the first defendant and sought the first defendant's confirmation that the proposed assignment was acceptable to the first defendant as he was the lessee and guarantor. The first defendant replied by letter of 28 May 2001 that the proposed arrangement was not acceptable as he wished the current arrangements to remain as they were as he wished to protect his interests. The first defendant went on to say that the then current relationship with the plaintiff was that the plaintiff had been appointed to perform the day-to-day operations of the car park.

60 On 17 July 2002 the first defendant wrote to the second defendant to confirm his desire to arrange a new lease in relation to the Esplanade car park. He proposed that the lease be in the name of Parking Asset Management Pty Ltd ("PAM") and be for an initial term of 10 years with three five year options. There were other terms and conditions proposed. There were then further discussions and correspondence between the first and second defendants in relation to the proposed new lease.

61 On 16 August 2002 the first defendant resigned as a director of the plaintiff.

62 On 28 August 2002 the first defendant wrote to the second defendant. The first defendant stated that a dispute had arisen between the plaintiff and the first defendant concerning the management of the Esplanade car park and went on to ask whether or not the second defendant was satisfied that the plaintiff fulfils the criteria set out in cl 8 of the lease. Clause 8 of the lease, to which I have already referred, deals with assignment and sets out the conditions upon which the lessor would assign the lease.

63 Mr Michel replied by letter of 29 August 2002. Mr Michel said that the second defendant would consent to an assignment strictly in accordance with the provisions of the lease and that if the first defendant wished to proceed with an assignment to the plaintiff it would be necessary to prove to the second defendant's satisfaction that the plaintiff fulfilled and met the assignment provisions of the lease which include personal guarantees.

64 In 2002 the plaintiff commenced Supreme Court action CIV 2192 of 2002 against the first defendant, PAM, Joan Olive Wilson and Lawrence Leslie Wilson. Joan and Lawrence Wilson are the parents of the first defendant. PAM is a company carrying on business as a car park operator and manager. Mrs Wilson is the sole director of PAM. Mr Lawrence Wilson is said to be a senior parking consultant with PAM.

65 In the amended statement of claim filed by the plaintiff in CIV 2192 of 2002 the plaintiff pleads that it had various rights and interests in relation to the Esplanade car park and four other car parks within the Perth metropolitan area. The plaintiff pleads that it was the holder of the rights to direct the management of the Esplanade car park. The plaintiff gives particulars of the facts giving rise to those rights as follows. First, the first defendant held the "formal" lease of the car park in his own name. Secondly, the first defendant, in or about 21 June 1996 granted to the Secure Parking group the right to direct the first defendant in the management of the car park according to their desires and best interests in consideration for the payment to him of $150,000 by the Secure Parking group. Thirdly, subsequently to the grant of the management rights in 1996 the first defendant signed an assignment of lease in relation to the car park in favour of the plaintiff. Fourthly, by letter dated 6 January 1997 the first defendant agreed to appoint the plaintiff a management contract [sic] for the term of the lease pending formal consent by the second defendant to the assignment of the lease. Fifthly, by letter dated 21 June 1996 and initialled by Mr Michel, the second defendant agreed on the terms for its consent to an assignment of the lease for the car park. Finally, it is said that pursuant to those arrangements the plaintiff had managed the car park since January 1997 and continued to manage the car park.

66 The plaintiff pleads that in breach of his fiduciary and statutory duties to the plaintiff, while holding office as a director of the plaintiff and while managing the plaintiff's business in Western Australia, the first defendant improperly attempted to divert a portion of the plaintiff's then existing business in Western Australia for the personal advantage of himself and the second, third and fourth defendants.

67 One of the allegations made by the plaintiff is that on or about 21 August 2002 the first defendant, in company with Mrs Wilson and security personnel employed by the other defendants, attempted to physically take possession of the Esplanade car park and another car park and to exclude employees of the plaintiff from those car parks.

68 The plaintiff makes other claims including a claim that the defendants, with intent to injure the plaintiff, conspired to use information obtained by the first defendant in his position as a director of the plaintiff and manager of the plaintiff's business in Western Australia to divert to the advantage of themselves a portion of the plaintiff's business in Western Australia.

69 The plaintiff claims an order that the defendants be restrained from entering into any agreement, arrangement or understanding for the lease, licence or other right to acquire the use of the car parks including the Esplanade car park. The plaintiff claims an order for specific performance by the first defendant of an agreement made on or about 21 June 1996 and 6 January 1997, partly in writing and partly by conduct that the first defendant grant the plaintiff a management contract for the Esplanade car park to manage the car park according to the desires and best interests of the plaintiff for the balance of the term of the lease held by the plaintiff. The plaintiff claims other relief including damages.

70 On 22 August 2002 the plaintiff sought interlocutory injunctions in CIV 2192 of 2002 preventing the defendants in that action from entering into arrangements in relation to the Esplanade car park and other car parks in which the plaintiff claimed to have an interest. This Court granted interlocutory injunctions in CIV 2192 of 2002 on 22 and 23 August 2002. The terms of those injunctions are not in evidence.

71 The plaintiff's application for interlocutory injunctions was supported by an affidavit sworn on 22 August 2002 by David John Knight, the General Manager of Auspark Holdings. In his affidavit Mr Knight swore to the following effect. In or about June 1996 the Secure Parking group, through Auspark Holdings, paid $150,000 to the first defendant to obtain an equal share in the first defendant's business operated at the Esplanade car park. The first defendant's letter of 21 June 1996 to the Secure Parking group confirmed the payment of $150,000. At the time of the letter there were discussions on behalf of Auspark Holdings for the Secure Parking group to obtain a formal assignment of the lease of the car park held by the first defendant to the plaintiff. There were some difficulties in relation to "the actual assignment of lease" concerning the form of guarantee that would be required for the assignment. The first defendant's letter of 6 January 1997 to the Secure Parking group set out a system whereby the lease of the car park would remain in the name of the first defendant but a Management Agreement would be set up for the term of the lease. That arrangement was put into operation and has been the basis of operations of the plaintiff since then. A formal assignment of lease was executed by the plaintiff and the first defendant but was not executed by the second defendant: "as the consent of the proprietor [the second defendant] has not been affixed to the deed the assignment was not completed and the formal lease remained in the name of the first defendant this assignment does not appear to have been stamped because it was not completed".

72 Mr Knight swore a further affidavit on 23 August 2002 to the following effect. By the terms of Annexure "L" to his affidavit of 22 August 2002 the managerial control of the car park was given to the plaintiff by the first defendant in return for the payment of $150,000. The operations of the car park had been conducted pursuant to that arrangement since then. In his evidence in this action Mr Knight agreed that the reference to Annexure "L" was a mistake. He said he thinks he intended to refer to the first defendant's letter of 21 June 1996 to Secure Parking group.

Did the second defendant consent to an assignment of the lease?

73 A central issue in this case is whether the second defendant consented to the assignment of the lease from the first defendant to the plaintiff. The plaintiff pleads that the second defendant did so by its letter of 20 June 1996 to the plaintiff's solicitor and by a note on a copy of that letter. The note, to which I have already referred, reads: "On the above basis the landlord agrees to the assignment" and is signed by Mr Michel and dated 21 June 1996.

74 The question whether the second defendant, by its note of 21 June 1996, thereby consented to an assignment of the lease to the plaintiff, or alternatively agreed to consent in the future to an assignment on the conditions set out in the letter of 20 June 1996, is to be determined by ascertaining the objective intentions of the parties.

75 I find that the second defendant did not consent to an assignment of the lease to the plaintiff, nor was there a binding agreement between the plaintiff and the second defendant that the second defendant would consent to the assignment of the lease on the terms set out in its letter of 20 June 1996.

76 In the communications between the plaintiff, the first defendant and the second defendant before 21 June 1996 the second defendant made it clear that if Garth and Brett did not provide guarantees as provided for by cl 8(c) of the lease it would not consent to an assignment unless the plaintiff agreed to the second defendant's Assignment Requirements. Nothing was said in the telephone conversation between Mr Raward and Mr Michel on 21 June 1996 to change that position. Mr Michel's note of 21 June 1996 confirms that position.

77 At no time did the plaintiff agree to the second defendant's Assignment Requirements. In particular, the plaintiff did not agree to Assignment Condition (b). In his letter of 27 May 1996 to the second defendant, Mr Raward responded to Mr Michel's proposal that the second defendant consent to the assignment provided that, amongst other things, the plaintiff agreed to Assignment Condition (b) by referring to the enclosed letter of 24 May 1996 from the first defendant. That letter put forward a proposal in relation to car bay usage by hotel guests and invitees that was different from and inconsistent with Assignment Condition (b). There is no evidence that Mr Raward or anyone on behalf of the plaintiff ever informed the second defendant that the plaintiff had changed its position and agreed to Assignment Condition (b).

78 Counsel for the plaintiff emphasised that in his note Mr Michel said: "On the above basis the landlord agrees to the assignment", that is Mr Michel said "agrees" in the present tense. Having regard to the communications between the parties before 21 June 1996 and the terms of the telephone conversation between Mr Raward and Mr Michel on 21 June 1996, in the terms stated by Mr Raward or the terms stated by Mr Michel, objectively determined the intention of the second defendant was that the second defendant would consent to an assignment on the terms set out in the second defendant's letter of 20 June 1996. Those terms were that there be a deed of assignment that included or gave effect to the second defendant's Assignment Requirements. I find that objectively determined the second defendant intended that there be a deed of assignment that included or gave effect to the second defendant's Assignment Requirements for the following reasons.

79 There had been discussions between the plaintiff and the first defendant and between the first defendant and the second defendant concerning an assignment of the lease for more than two months before 20 June 1996. In its letter of 20 June 1996 to the plaintiff's solicitor the second defendant said that it was prepared to forego its entitlement under cl 8.1(c) of the lease providing that the second defendant's Assignment Requirements were satisfied. Clause 8.1(c) of the lease provided for guarantees on an assignment of lease. Assignment Condition (a) was that the plaintiff provide a corporate guarantee, that Brett and Garth provide personal guarantees for a three month period and that the first defendant's guarantee continue. Businessmen would have understood that those guarantees would be incorporated into a deed of assignment. It would not be in the contemplation of businessmen that separate guarantee documents would be executed. Assignment Condition (b) was that a give and take usage of bays by "Hotel Guests/Invitees" continues, ie "there is no charge/adjustment where the Level Exceeds 10 or is less than 10". Assignment Condition (c) was that there is no variation sought to the 148 bays leased. The stating of that condition is consistent with the parties intending that the second defendant's consent to the assignment of the lease would be effected by the execution of a deed of assignment.

80 The second defendant had first proposed the second defendant's Assignment Requirements in its letter of 21 May 1996 to the first defendant. The first defendant had raised the prospect of an assignment of the lease at the request of Brett. The plaintiff's solicitor had received a copy of the second defendant's solicitor's letter of 21 May 1996. Mr Raward responded to it on behalf of the plaintiff by his letter of 27 May 1996 to the second defendant. In his letter of 21 May 1996 Mr Michel had said that as the first defendant was unable to obtain personal guarantees from the directors of the plaintiff, the second defendant proposed certain "variations" to the lease to enable the assignment to take place. One variation was that the provision of free bays to hotel guests and invitees be on a give and take basis, whereas the hotel may have more or less than 10 bays at any one time but not more than 20 determined by the second defendant. Mr Michel stated that the drafting of those variations would be left to the second defendant's solicitors subject to their prior agreement. Clearly, it was there envisaged that the second defendant's consent to the assignment would be incorporated in a deed which would give effect to the proposed "variations". The subsequent correspondence and discussions must be seen in that context.

81 Senior counsel for the defendants submitted that the conduct of the parties subsequent to 21 June 1996 point strongly to the fact that no consent was given by the second defendant to the assignment of the lease and that it was understood by the plaintiff at all times that the letter of 20 June 1996 and Mr Michel's handwritten note of 21 June 1996 were no more than an offer to consent to an assignment on the terms set out in that letter.

82 Pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347 - 352. Post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647 at 668, 669, 672; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [25]. Post-contractual conduct is not admissible on the question of what a contract means, as distinct from the question of whether it was formed: Brambles Holdings Ltd v Bathurst City Council (supra) at [26]. The same principles should apply to the admissibility of evidence on the question of whether the second defendant consented to the assignment of the lease to the plaintiff. In the circumstances of this case, evidence of both pre-contractual and post-contractual conduct is admissible. That is because the evidence goes to whether or not an agreement was formed between the plaintiff and the second defendant, that is whether the second defendant consented to the assignment. Alternatively, the evidence is admissible because the meaning of Mr Michel's note of 21 June 1996 is ambiguous.

83 After 21 June 1996 the first defendant and the plaintiff operated the car park and their relationship on the basis set out in the first defendant's letter of 21 June 1996 to the Secure Parking group. That is, the first defendant granted to the plaintiff all rights to receive all income and revenue from the Esplanade car park's operation as if the lease had been formally assigned to the plaintiff. The first defendant and the plaintiff proceeded to attempt to get the second defendant to execute the deed of assignment. That conduct is consistent with the lease not having been assigned to the plaintiff.

84 On 6 January 1997 the first defendant wrote to the Secure Parking group recommending that the lease remain in the name of the first defendant and the first defendant appoint the plaintiff a management contract [sic] for the term of the lease.

85 On 10 February 1997 the first defendant wrote to the plaintiff confirming and continuing the arrangement set out in his letter of 21 June 1996, that is that until such time as the transfer of lease of the car park was formally consented to by the second defendant, the first defendant granted to the plaintiff all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to the plaintiff.

86 Throughout the second half of 1996 the second defendant's solicitors wrote to the plaintiff or its solicitors in terms inconsistent with there having been an assignment of the lease to the plaintiff that had been consented to by the second defendant. At no time did the plaintiff, or its solicitor, challenge the matters being put by the second defendant's solicitors or assert that the lease had been assigned to the plaintiff with the consent of the second defendant.

87 In CIV 2192 of 2002 the plaintiff has conducted the action on the basis that since June 1996, or January 1997, the Esplanade car park had been operated on the basis that there was a management agreement between the plaintiff and the first defendant. In that action the plaintiff claims an order for specific performance by the first defendant of an agreement said to have been made on 21 June 1996 and 6 January 1997 that the first defendant grant the plaintiff a management contract for the Esplanade car park. The plaintiff's claims in that action are, and the manner in which it has conducted the action is, consistent with the Esplanade car park lease not having been assigned to the plaintiff because the second defendant did not consent to the assignment.

88 Those matters support and confirm my conclusion that the second defendant did not consent to an assignment of the lease to the plaintiff.

89 The plaintiff submits that the second defendant agreed to an assignment of the lease subject to the conditions set out in its letter of 20 June 1996 being satisfied. The evidence does not establish that Assignment Condition (b) was ever satisfied. The condition required "a give and take usage of bays by Hotel Guests/Invitees continues ie 'there is no charge/adjustment where the Level Exceeds 10 or is less than 10' ". That arrangement in relation to usage of car bays by hotel guests and invitees is different from item 9.2 of the lease. The plaintiff submits that the usage referred to in the condition is not inconsistent with item 9.2 of the lease but, rather, is a mode of performance of item 9.2 of the lease. I do not accept that argument. The essence of the agreement or arrangement required by the second defendant was that the hotel guests and invitees should be entitled to use more than 10 car bays without charge to the second defendant. Item 9.2 in the lease does not confer any such entitlement on the second defendant.

90 On 25 February 1997 the first defendant, as State Manager of the plaintiff, wrote to the second defendant concerning car parking arrangements. The letter stated that under the current lease agreement the hotel had 10 free hotel bays available for their use. The letter stated that the hotel was exceeding the allowable free bays. The plaintiff, through the first defendant, asserted that as a show of good will it had not charged for that extra usage but asserted that it was entitled to do so. The plaintiff went on to state that once renovations were completed it would expect the lessor to abide by the free parking arrangements in accordance with the lease. There is no evidence that at any subsequent time the plaintiff agreed to the "give and take" use of car bays arrangement requested by the second defendant, that is Assignment Condition (b). Nor is there any evidence that the second defendant used more than 10 bays and was not charged for them, other than as set out in the letter of 25 February 1997 to which I have referred and which expressly claimed that the plaintiff was entitled to charge where more than 10 car bays were used.

Did the first defendant assign the lease to the plaintiff?

91 An assignment is created when the lessee transfers the existing lease, that is the whole of its term, to the assignee. In this case, the first defendant's right to assign was qualified by a covenant not to assign or part with possession without the consent of the second defendant. Notwithstanding such a covenant, an assignment by the lessee in breach of the covenant not to assign is effective to pass the estate. However, if there is a forfeiture clause in the lease the landlord has the right to re-enter for the breach depriving the assignee of the estate, or the landlord may sue for damages: "Laws of Australia" 28.7: [110] citing Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 50; Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406 at 409 - 410; Massart v Blight [1951] HCA 20; (1951) 82 CLR 423 at 440; Wilson v Jolly (1948) 48 SR (NSW) 460 at 464, 469; Butt, "Land Law" at [15101]. Furthermore, unless the landlord elects to enforce such a right of re-entry, the assignment remains effective. A landlord who accepts rent from the assignee may be held to have impliedly consented to the transaction and thereby lost the right to complain: Butt (supra) at [15101] citing Property & Bloodstock Ltd v Emerton [1968] 1 Ch 94 at 119; Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) [1979] EWCA Civ 2; [1979] 1 WLR 1397; Welch v Birrane (1974) 29 P & Cr 102.

92 Hence, it is necessary to determine whether or not the first defendant assigned the lease to the plaintiff, notwithstanding that the second defendant did not expressly consent to such an assignment.

93 In par 5 of the statement of claim as finally amended, which I will refer to as the statement of claim, the plaintiff pleads that in or about June 1996 the first defendant orally agreed with the plaintiff (in terms as confirmed in a letter dated 21 June 1996 from the first defendant to the Secure Parking group) to assign the lease to the plaintiff for the consideration of $150,000 paid to the first defendant by the Secure Parking group on behalf of the plaintiff and pending formal assignment of the lease agreed to grant to the plaintiff all rights to the lease, as if the lease had been formally assigned. In par 6 the plaintiff pleads that by letter from the second defendant to a representative of the plaintiff dated 20 June 1996 and by a handwritten notation dated 21 June 1996 of a director of the second defendant, the second defendant consented to the assignment of the lease from the first defendant to the plaintiff upon the completion of three specified conditions. In par 7 the plaintiff pleads that the plaintiff fulfilled the conditions in or about July 1996 and in any event no later than the end of September 1996 and at that time a deed of assignment of lease was prepared and executed by the plaintiff and the first defendant.

94 In the course of his closing submission I asked counsel for the plaintiff how the assignment was effected, was it oral, written or by conduct? Counsel submitted that the assignment was effected by the deed of assignment, in writing (T 770). That is consistent with the way in which the plaintiff's case was run.

95 The first defendant executed a deed of assignment. The nominated parties to the deed of assignment are the first defendant, the plaintiff, the second defendant and Brett and Garth as guarantors. Recital C provides:

"The Assignor has agreed subject to the Lessor's consent to assign the lease and the premises to the Assignee for the balance of the Term and the Assignor, the Assignee and the Guarantor have applied to the Lessor for the Lessor's consent to the assignment."

"In consideration of the covenants and agreements contained in or implied by this deed, the Assignor assigns to the Assignee all the Assignor's estate right and interest in the Lease and the Premises ... ."

97 Clause 4.1(a) provides that the first defendant covenants with the second defendant to withdraw any caveat affecting the premises lodged by the first defendant and if the first defendant fails to withdraw the caveat the first defendant irrevocably appoints the second defendant to be the attorney for the assignor to sign and lodge at the Office of Titles a withdrawal of the caveat. Clause 7 provides that the second defendant consents to the assignment.

98 Having regard to the terms of the deed of assignment, I conclude that the first defendant did not objectively intend to assign the lease to the plaintiff unless and until the deed was executed by the second defendant. Recital C expressly provides that the first defendant's agreement to the assignment was subject to the second defendant's consent. The deed nominated the parties to the deed to be, and for the deed to be executed by, the plaintiff, the second defendant and Brett and Garth as well as the first defendant. The terms of the deed gave effect to a transaction between those parties whereby each undertook obligations towards the others. The inference is that the deed was executed by the first defendant conditionally upon it being executed by the other parties. To conclude otherwise would be to conclude that the first defendant intended to assign the lease to the plaintiff notwithstanding that the second defendant withheld its consent to the assignment and the first defendant thereby breached the lease and exposed himself to the risk of the second defendant re-entering the premises or claiming damages from the first defendant. There is nothing in the circumstances of the case to suggest that the plaintiff and first defendant intended such a result. To the contrary, the plaintiff and first defendant conducted themselves on the basis that there had been no assignment of the lease pending the consent of the second defendant.

99 For the reasons stated, I conclude that the first defendant did not assign the lease to the plaintiff.

100 The plaintiff pleads alternatively that the second defendant is estopped by its conduct from denying that it has consented to the assignment. The plaintiff pleads that by virtue of Mr Michel's note of 21 June 1996 the plaintiff did, upon completion of the conditions, expect that the particular legal relationship existed between the plaintiff and the second defendant, that the second defendant had consented to the assignment of the lease to the plaintiff and was not free to withdraw from that relationship created by that consent. The plaintiff says that by signing the note the second defendant induced the plaintiff to adopt the expectation referred to. The plaintiff further says that it acted on that expectation and assumption by proceeding to take possession of, and responsibility for, as lessee, the Esplanade car park and thereafter by complying with the obligations of the lessee and further by abstaining, in reliance on the expectation referred to, from seeking an alternative site for its business in the City of Perth. The plaintiff pleads that the defendant knew or intended that the plaintiff would so act and occupy the Esplanade car park from about June 1996 pursuant to the terms of the lease. The plaintiff says that it will suffer detriment if the expectation referred to is not fulfilled because its investment in the Esplanade car park will not produce its expected return over the term of the lease and options and the value of its capital investment will be diminished.

101 There are three elements required to set up an estoppel. First, the party claiming the estoppel must have adopted an assumption as the basis of an act or omission. Secondly, the claimant, upon the basis of the assumption, must have so acted or abstained from acting that a detriment will be suffered if the person against whom the estoppel is asserted is afterwards allowed to set up rights inconsistent with it. Thirdly, the party against whom the estoppel is alleged must have played such a part in the adoption of, or persistence in, the assumption that freedom to act otherwise than in a manner consistent with it would be unfair or unjust.

102 The plaintiff's case is that it adopted an assumption that the second defendant had consented to the assignment of the lease to the plaintiff.

103 I am not satisfied that the plaintiff adopted as the basis of action the assumption that the second defendant had consented to the assignment of the lease to the plaintiff and was not free to withdraw from that relationship created by that consent. The conduct of the plaintiff, through the Matthews brothers and its solicitor subsequent to 21 June 1996 is inconsistent with the plaintiff having adopted such an assumption.

104 In August 1996 the second defendant's solicitors, Jackson McDonald, wrote to the plaintiff's solicitor. Jackson McDonald referred to the deed of assignment executed by the plaintiff and first defendant and stated that the deed of assignment had not addressed Assignment Condition (b). Follow-up letters were sent by Jackson McDonald during the second half of 1996 but Mr Raward made no reply.

105 The first defendant wrote to Secure Parking on 6 January 1997. The letter was sent by facsimile transmission and Ms Nash, secretary of Secure Parking, made a handwritten note to forward the letter to Mr Raward. The letter was subsequently sent to Mr Raward. It is clear from the letter that the second defendant maintained it had not consented to an assignment of the lease. No one on behalf of the plaintiff responded to or otherwise disputed that position.

106 In August 2002 there was a dispute between the plaintiff on the one hand and the first defendant, his parents and PAM on the other, to which I have earlier referred. That resulted in proceedings in this Court. The affidavits sworn by Mr Knight in those proceedings on behalf of the plaintiff, to which I have earlier referred, are to the effect that because the assignment had not been obtained, the parties proceeded on the basis of the management agreement between the plaintiff and the first defendant.

107 In any event, the second defendant did not play such a part in the adoption of, or persistence in, an assumption by the plaintiff that the second defendant had consented to the assignment, if, contrary to my finding, the plaintiff adopted such an assumption, such that it would be unfair or unjust for the second defendant to deny that it consented to the assignment. Mr Michel's note of 21 June 1996, and the circumstances in which it was given, would not have been understood by a reasonable person to constitute a present consent to an assignment of the lease. In any event, the conduct of the second defendant subsequent to 21 June 1996 made it clear that the second defendant had not consented to the assignment.

108 The plaintiff claims to have acted or abstained from acting on the basis of the assumption that the plaintiff had consented to the assignment of the lease. The plaintiff says it acted by proceeding to take possession of and responsibility as lessee for the car park and by abstaining from seeking an alternative site to the Esplanade car park for its business in the City of Perth.

109 I am not satisfied that the plaintiff so acted on the assumption that the second defendant had consented to an assignment of the lease. After the plaintiff, through Mr Raward, had received the second defendant's letter of 20 June 1996 the first defendant sent to Brett and Garth his letter of 21 June 1996. The first defendant gave evidence that on 21 June 1996 he received a telephone call from Garth in which Garth said words to the effect that Mr Raward had received a faxed letter from Mr Michel. The first defendant said that later that day he received a telephone call from Brett, during which Brett dictated to him over the phone the words that he wanted the first defendant to include in a letter. The first defendant says that following the telephone call he typed the letter dictated to him by Brett and dated it 21 June 1996 and addressed it to "Secure Parking Group". The first defendant said he sent the letter by facsimile to Brett on 24 June 1996.

110 I accept that the first defendant had telephone conversations with Garth and Brett on 21 June 1996. I further accept that during the telephone conversation with Brett, Brett asked the first defendant to send him a letter and Brett stated, if not dictated, the substance of the letter he required. I further accept that the contents of the first defendant's letter of 21 June 1996 to Secure Parking group was sent by facsimile to Secure Parking group's office in Sydney on 24 June 1996 and in substance was in accordance with what Brett had asked the first defendant to include in his letter.

111 I find that the first defendant's letter of 21 June 1996 sets out the terms of the agreement between the plaintiff and the first defendant made after the plaintiff had received the second defendant's letter of 20 June 1996 and Mr Michel's note of 21 June 1996. The letter does not say that the plaintiff was proceeding to take possession of, and responsibility for, the Esplanade car park as lessee. To the contrary, the letter says that the assignment, or transfer, of the lease had not been formally consented to by the second defendant and that until then the first defendant granted to the plaintiff all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to the plaintiff. The letter goes on to agree that the plaintiff would be entitled to direct the first defendant to manage the car park according to its desires and best interests. That is not a reference to the first defendant's obligations to the plaintiff as an employee. It is a recognition that the first defendant continued to be the holder of the leasehold interest in the car park.

112 The first defendant's letter of 6 January 1997 to the Secure Parking group was received by Garth and Brett's personal assistant and forwarded to the plaintiff's solicitor. That letter makes recommendations on the assumption that the lease had not been assigned to the plaintiff. It recommends that the first defendant appoint the plaintiff a management contract for the term of the lease. No one on behalf of the plaintiff challenged the assumption in the letter that the first defendant remained legally in possession of the car park and the lessee of the car park.

113 I accept the evidence of the first defendant that he wrote his letter of 10 February 1997 to Garth and Brett at the request of Brett, although I do not necessarily accept that Brett dictated to the first defendant the terms of the letter. I note the letter is in substantially the same terms as the first two paragraphs of the first defendant's letter to Secure Parking group of 21 June 1996. The letter of 10 February 1997 again states that the first defendant granted to the plaintiff all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to the plaintiff. That is, the letter states, in effect, that the first defendant remained the lessee and was entitled to receive all income and revenue from the car park's operation and therefore had the right to grant such rights to the plaintiff.

114 I do not accept that the plaintiff abstained from seeking an alternative site to the Esplanade car park for its business in the City of Perth. The plaintiff is part of the Secure Parking group. Mr Knight gave evidence that the Secure Parking group has approximately 10 parking operations in Western Australia and in 2002 had a couple more than that. Mr Thornley was asked in cross-examination whether he had taken any steps since September 2002 when he became the manager to obtain an alternative site. He said that they had obtained an additional car park at 501 Murray Street since then. He said that prior to him becoming manager Secure had obtained approximately four car parks in the Perth CBD. The plaintiff's claim is not made out on that issue.

115 For the reasons stated, I find that the plaintiff's estoppel case is not made out.

116 The plaintiff claims that by accepting rent from the plaintiff the second defendant impliedly consented to the assignment of the lease or waived its right to object to the assignment. This argument depends on the plaintiff establishing that the first defendant had assigned the lease of the car park to the plaintiff and accepted rent from the plaintiff. I have already found that the first defendant did not assign the lease to the plaintiff. Furthermore, I find that the second defendant did not know or believe that the first defendant had assigned the lease to the plaintiff.

117 The second defendant knew that the first defendant had executed the deed of assignment. However, I have found that the first defendant's execution of that document did not effect an assignment of the lease. Furthermore, the evidence does not establish that the second defendant believed that it did so.

118 The second defendant knew that the plaintiff was involved with the Esplanade car park in some way after 21 June 1996. Some time later the car park attendants commenced wearing Secure Parking uniforms and Secure Parking signs were displayed on the premises. The rent was paid to the second defendant by cheques drawn on the plaintiff. However, those facts do not constitute an assignment of the lease and the evidence does not establish that the second defendant believed that they did so or that they were consequential upon an assignment of the lease or upon the plaintiff taking legal possession of the car park.

119 On 12 July 1996 Mr Raward wrote to the second defendant enclosing the deed of assignment in triplicate for execution by the second defendant. On 12 August 1996 the second defendant's solicitors wrote to Mr Raward proposing an amendment to the deed of assignment. Mr Raward did not respond. On 4 September 1996 the second defendant's solicitors wrote to Mr Raward seeking a response. Mr Raward did not respond. On 5 November 1996 the second defendant's solicitors again wrote to Mr Raward stating that they had heard nothing on the matter since their facsimile letter of 12 August. On 26 November 1996 the second defendant's solicitors wrote to the first defendant's solicitor. The second defendant's solicitors referred to the proposed assignment to the plaintiff. They referred to proposed variations to the deed of assignment concerning nominated car parking bays for the use of the hotel's business and stated that the second defendant required resolution on that point before executing the deed of assignment. On 26 November 1996 the second defendant's solicitors wrote to Mr Raward stating that the second defendant still required resolution of the proposed new arrangement with respect to nominated car parking bays for use associated with the hotel business before it would accept the proposed terms of assignment. On 27 November 1996 the second defendant wrote to the first defendant in terms consistent with the first defendant being the lessee and inconsistent with there having been an assignment of the lease to the plaintiff. The second defendant requested that the first defendant obtain a report from Barry Chester & Hick pursuant to the lessee's reporting obligations under the lease. The first defendant subsequently caused Barry Chester & Hick to prepare a report for the purpose of fulfilling the lessee's financial reporting requirements under the lease. On 13 February 1997 the second defendant wrote to the first defendant. The second defendant said that an assignment of the lease is still to be finalised and the second defendant was unsure of the position of "Secure Parking". The second defendant required the first defendant to arrange insurance coverage as required by the lease. On 27 February 1997 the second defendant wrote to the first defendant stating that it remained prepared to grant approval to the assignment of the lease providing the essential terms of the lease concerning assignment were complied with. The letter stated, in part:

"With regards to your arrangement with Secure Parking, we suggest that you provide us with a copy of the Management Agreement so that we can be assured that you have not parted with possession."

120 I find that the conduct of the second defendant was consistent with the position being, and the second defendant believing that the position was, that the lease of the car park had not been assigned to the plaintiff and the plaintiff was operating the car park pursuant to a management agreement with the first defendant.

121 For those reasons, the plaintiff has not established that the second defendant impliedly consented to the first defendant assigning the lease to the plaintiff or that the second defendant waived its right to object to an assignment.

The alternative plea based on plaintiff's right to direct first defendant

122 The plaintiff's alternative argument is based upon the first defendant's letter of 21 June 1996 to the Secure Parking group. The letter states that the first defendant granted to the plaintiff all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to the plaintiff. The first defendant further stated:

"Your company will be entitled to direct me manage [sic] the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions."

123 The plaintiff submits that the agreement constituted or evidenced by the letter of 21 June 1996 entitles the plaintiff to require the first defendant to exercise the option of renewal of the lease.

124 The plaintiff submits that the concept of management can extend, and will extend, to the creation of liabilities by the manager and for the manager if that is the manner in which the property has been managed or ought to be managed. The plaintiff referred to a number of authorities. However, I do not find any of those authorities helpful.

125 I am not satisfied that the right of the plaintiff to direct the first defendant to manage the car park according to its desires and best interests includes the right to direct the first defendant to exercise the option of renewal under the lease.

126 The letter of 21 June 1996 does not say that the first defendant granted to the plaintiff all rights under the lease as if the lease had been formally assigned to the plaintiff. The rights granted by the first defendant are confined to the rights to receive the income and revenue from the car park's operation. That is consistent with the first defendant remaining lessee of the car park. The statement in the letter that the plaintiff would be entitled to direct the first defendant to manage the car park according to the plaintiff's desires and best interests must be considered in that context.

127 The arrangement between the plaintiff and the first defendant was confirmed or renewed in the first defendant's letter of 10 February 1997 to the plaintiff.

128 The plaintiff pleads that if there is not an express term that the plaintiff be entitled to direct the first defendant, as part of the management of the Esplanade car park according to the desires and best interests of the plaintiff, to exercise the option to renew the lease then a term should be implied to that effect. The plaintiff pleads that such a term meets the requirements set down by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283 and endorsed by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) at 347 - 404. The application of the five criteria set out in BP Refinery is restricted to written contracts. Where the contract has not been recorded in a document, they are replaced with a single criterion: a term is implied if it is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case: Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 428, 443 - 444; Breen v Williams (1996) 186 CLR 71 at 90, 123.

129 The terms sought to be implied must be needed in order to make the agreement work, or conversely, in order to avoid an unworkable situation. Clear necessity is required. It is not enough that it is reasonable to imply a term: it must be necessary. What is required is consideration of what would make the contract workable in a business sense. It is not the case that necessity can be established only by showing that without the term in question the contract cannot be carried out at all. A term may be commercially necessary even if the contract can operate without it: see Cheshire and Fifoot's "Law of Contract", 8th Aust ed, at [10.55] - [10.56].

130 I am not satisfied that the term sought to be implied is necessary for the reasonable or effective operation of an agreement of the nature entered into between the plaintiff and the first defendant in the circumstances of the case. The consideration for the plaintiff acquiring the relevant rights under the agreement of June 1996 was the payment of $150,000 to the first defendant. That is a significant capital investment. However, the lease had four years and four months still to run. The circumstances of the case do not establish that commercial necessity required the term sought to be implied.

131 If such a term was to be implied it would allow the plaintiff to unilaterally extend the first defendant's legal obligations as lessee, including the obligation to pay rent, for a further five years or perhaps a further 10 years. The plaintiff submits that part of the implied term, or a further implied term, is that the plaintiff indemnify the first defendant against any claims or losses arising out of or resulting from the failure of the plaintiff to pay the rent or from any other breach by the plaintiff of the lessee's covenants under the lease. Such an indemnity would offer some comfort to the first defendant. However, the first defendant would remain under the legal obligations to the second defendant created by the renewed lease. The indemnity would not, of course, be of any value to the first defendant if the plaintiff was to become insolvent. Furthermore, if the plaintiff refused or failed to meet its obligations under the indemnity the first defendant would have to bear the expense and inconvenience of enforcing the indemnity and be exposed to liability to the second defendant pending the enforcement of the indemnity. In short, the implication of such a term would expose the first defendant to financial risk. That is a further reason for finding that it is not commercially necessary to imply a term or terms as argued by the plaintiff.

132 For the reasons stated, I find that the plaintiff is not entitled to direct the first defendant to exercise the option to renew the lease.

133 The plaintiff argues that the first defendant prevented the second defendant from consenting to the assignment of the lease on the terms agreed in February 1997. The plaintiff submits that in those circumstances the first defendant's position should be considered to be the same as if the consent had been given and the lease assigned to the plaintiff. That position, it was submitted, would be that the plaintiff would be entitled to exercise the option to renew the lease but the first defendant would have continued to be liable for all outgoings on the lease but protected by the plaintiff's indemnity. That is how the premises were managed between 1996 to 2000 and then from the exercise of the option to renew in 2000. The plaintiff submits that the same position would continue for the second term and the first defendant would be in the same position that he has been in since 1996 in regard to the lease and liabilities thereto as he agreed to be in by his letter of 21 June 1996.

134 The plaintiff submitted that "the usual rule" would apply "namely to treat the thing being prevented as having occurred". The plaintiff referred to Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 per Dixon CJ at 246 - 247. In the passage referred to, Dixon CJ said:

"Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof: Hotham v East India Co [1787] EngR 48; (1787) 1 TR 638; 99 ER 1295. But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention."

135 That principle does not apply to the present circumstances. The plaintiff seeks to establish that the second defendant consented to the assignment of lease, or should be treated as having consented. It is not alleged that the second defendant prevented the fulfilment by the plaintiff of the conditions of the consent.

136 Furthermore, insofar as the principle is sought to be applied so that the plaintiff is to be treated as having exercised the option to renew the lease, the principle has no application. The principle could only apply if the plaintiff had the right to exercise the option to renew the lease and had been prevented from doing so by the second defendant. That has not been established.

137 In its reply, the plaintiff argues that there is a collateral agreement between the plaintiff and the second defendant. The plaintiff says that the words of Assignment Condition (b) were interpreted and given effect to by the first and second defendants, in their respective operations of the lease prior to 20 June 1996 as the requirements of, or alternatively as an agreed variation to, the mode of performance of cl 9.2 of the schedule to the lease. The plaintiff says that by executing the deed of assignment it bound itself to the terms of the lease either in original form, or alternatively, as varied in relation to the give or take usage of car bays referred to in Assignment Condition (b). The plaintiff says that pursuant to the terms of cl 9.2 of the schedule to the lease and its covenant contained in cl 6 of the assignment to lease the plaintiff has, since July 1996, complied with Assignment Condition (b) as agreed to by the second defendant on 21 June 1996.

138 Apart from any other answer to the collateral agreement argument, it fails on the facts. The plaintiff has not proved that since July 1996 it complied with the give and take usage of the car park referred to in Assignment Condition (b). The first defendant, as State Manager of the plaintiff, wrote to the second defendant on 25 February 1997 in relation to the arrangements for the use of parking bays by the second defendant or the hotel. By that letter the plaintiff asserted that the second defendant was entitled to use only 10 free bays and the first defendant was entitled to charge for the use by the hotel of more than 10 car bays. There is no evidence that the plaintiff or the first defendant agreed to the give and take usage set out in Assignment Condition (b).

139 In its reply, the plaintiff pleads that the second defendant unreasonably withheld consent to the assignment of the lease. Apart from any other answer to that argument, it fails at the outset because the second defendant did not unreasonably withhold consent to the assignment. Under the terms of the lease the second defendant was entitled to require a personal guarantee by all or any of the directors or principal shareholders of a corporate assignee or of its parent corporation (if any) of that corporation's due performance of the lease. The plaintiff sought an assignment without those guarantees. The second defendant was willing to consent to an assignment on the basis that Brett and Garth give limited personal guarantees providing that the plaintiff agreed to the "give and take" car bay usage referred to in Assignment Condition (b). In effect, that request was the quid pro quo for accepting limited personal guarantees from Brett and Garth. That was not unreasonable.

140 Furthermore, the plaintiff is not a party to the lease and has no standing to bring an action for breach of the lease by unreasonably withholding consent. Section 11 of the Property Law Act 1969 (WA) does not provide statutory standing to the plaintiff. Section 11 of the Property Law Act cannot be invoked unless the third party is named as a third party beneficiary. It is not sufficient that in practical terms a third party may indirectly benefit from the contract or a contracting party deals directly with the third party: Cheshire and Fifoot's "Law of Contract", 8th Australian edition, at [7.17].

141 For the reasons stated, the plaintiff's action is dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : SECURE PARKING (WA) PTY LTD -v- WILSON & ANOR [2005] WASC 264 (S)

HEARD : 15-17 AUGUST, 5-8 SEPTEMBER, 14 OCTOBER 2005

BETWEEN : SECURE PARKING (WA) PTY LTD (ACN 073 500 160)

Costs - Indemnity costs - Whether rejection of Calderbank offer reasonable - Separate bills of costs - Certificate for second counsel - Whether instruction of senior counsel reasonable - Special order for costs - Whether scale of costs inadequate due to matter's complexity - Whether agreed statement of facts and objections to witness statements form part of getting up case for trial and brief fee

Legal Practice Act 2003 (WA), s 210, s 215

Legal Practitioners Act 1893 (WA), s 58M, s 58W

Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2002] WASC 150

Loveday v Renton (No 2) [1992] 3 All ER 184

Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450

Stanley v Phillips [1966] HCA 24; (1966) 115 CLR 470

Calderbank v Calderbank [1975] 3 All ER 333

SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26 (S2)

Tickell v Trifleska Pty Ltd (1991) NSWLR 353

1 LE MIERE J: On 7 December 2005 I delivered my reasons for judgment and ordered that the plaintiff's action be dismissed. On 7 December 2005 I heard argument in relation to costs. These are my reasons for judgment in relation to the costs of the action.

2 The second defendant claims that the plaintiff be ordered to pay the second defendant's costs taxed on an indemnity basis. If costs awarded are to be taxed on an indemnity basis against a party, it will pay all the costs incurred by its opponent except in so far as they are of an unreasonable amount or have been unreasonably incurred so that, subject to those exceptions, the opponent is completely indemnified for his costs.

3 The second defendant seeks indemnity costs on the basis of an offer to compromise the action made in a letter of 21 February 2003 from the second defendant's solicitors to the plaintiff's solicitors. The letter stated that the second defendant was presenting a "Calderbank" offer. The terms of the offer were:

(a) the second defendant will execute the assignment of lease upon the plaintiff satisfying cl 8 of the lease (ie the plaintiff providing the second defendant with financial statements of both the corporate and personal guarantors of the lease);

(b) the action against the second defendant be discontinued with no order as to costs.

4 The plaintiff's solicitor responded by a letter of 25 February 2003. The plaintiff's solicitor asked the second defendant's solicitor to clarify the following matters:

1. That the terms of the offer are that the second defendant will unconditionally execute the Assignment of Lease that has already been executed by the plaintiff and its current directors and the first defendant.

2. If the plaintiff accepts the offer, please clarify if the terms of the offer are such that they can be carried out simultaneously, ie: the second defendant's solicitor deliver to the plaintiff the executed Assignment of Lease in exchange for the delivery of the financial statements sought by the second defendant. The plaintiff will then proceed to have the Assignment Lease stamped and copies forwarded to the respective parties.

5 The second defendant's solicitor replied that it would not execute the Deed of Assignment of Lease (the Deed) for the following two reasons. Firstly, the Deed is approximately seven years old so it is inadequate. Secondly, the Deed refers to a limitation of the liability of the directors of Secure Parking, Garth and Brett Matthews, to a maximum of three months' rent of the Lease. This clause is at odds with the directors' undertaking in their letter to the second defendant on 3 September 2002 that they will provide unrestricted personal guarantees. The Deed is inadequate and a new deed of assignment of lease will have to be drawn in accordance with cl 8 of the Lease. Furthermore, the plaintiffs request that an executed assignment of lease be exchanged for delivery of the financial statements of the directors is at odds with cl 8 of the Lease. The second defendant requires the plaintiff to comply with cl 8 of the Lease, that is, the plaintiff and its directors provide adequate financial information supporting its ability to support the guarantees to the Lease. Upon satisfaction of this term of the Lease, the second defendant would then consent to the Assignment of the Lease.

6 By letter of 21 March 2003 to the second defendant's solicitors, the plaintiff's solicitors said that the matter should be resolved by the following events:

1. The second defendant executing and delivering the Assignment of Lease.

2. At the same time the plaintiff delivering unrestricted personal undertakings by the directors of the plaintiff as discussed in subsequent correspondence.

3. At the same time, the plaintiff deliver financial statements.

7 By letter of 15 April 2003 the plaintiff put forward the following further offer:

1. The plaintiff will deliver up the financial statements of the guarantors of the lease, ie Brett and Garth Matthews within seven days of acceptance of this offer.

2. The second defendant execute the Assignment of Lease dated 1996 within seven days of receiving the said financials.

3. Upon receipt of the executed Assignment of Lease, the plaintiff's solicitors will prepare consent orders to discontinue the proceedings with no order as to costs.

8 By letter of 17 April 2003 to the plaintiff's solicitors the second defendant's solicitors rejected the plaintiff's offer and stated that the second defendant requires full and strict compliance with the lease agreement.

9 By letter of 28 April 2003 to the second defendant's solicitors, the plaintiff's solicitors stated that the plaintiff was willing to consider reimbursing the second defendant for its legal costs if the second defendant proceeded in the manner set out in the plaintiff's previous offer of settlement.

10 The essence of the second defendant's offer was that it required the plaintiff to deliver financial statements of the plaintiff and unlimited personal guarantees from Garth and Brett Matthews. Upon receiving those statements and guarantees the second defendant would consider whether or not it was satisfied that the plaintiff was a respectable, responsible and financially acceptable solvent person capable of performing the obligations of the lessee under the lease and adequately carrying on the business. If the plaintiff accepted that offer then it was at least possible that the second defendant would determine that it was not satisfied that the plaintiff was a respectable, responsible and financially acceptable solvent person capable of performing the obligations of the lessee under the lease and adequately carrying on the business and consequently decline to execute an Assignment of the Lease. The plaintiff was prepared to compromise the action on the basis that the second defendant agreed that upon the plaintiff providing its financial statements and personal guarantees from Garth and Brett Matthews the second defendant would execute the deed of assignment. The second defendant would not agree to that. In effect, the second defendant's offer was that the plaintiff discontinue its action and comply with cl 8 of the lease. Clause 8 of the lease reserves for the second defendant the right to decline the assignment if it is not satisfied by the financial information provided by the plaintiff.

11 Counsel for the second defendant agreed with the relevant principles relating to an offer of compromise advanced by the plaintiff. Those principles are as follows. The rejection of a "Calderbank" letter does not of itself create an entitlement for a special costs order, see Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450 at [94] and Templeman J in Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2002] WASC 150 (supplementary decision given 30 August 2002). In Optus Networks, Hunter J said at [94]:

"The role of offers of compromise as a factor in the exercise of discretion has been the subject of numerous cases, one of which is that of Hamilton J in Cumming v Sands [2001] NSWSC 706 in which his Honour expressed the approach to offers of compromise in that context as follows:

'The parties agree (correctly) that the critical question is whether the first defendant has acted unreasonably in refusing to accept the plaintiff's offer of settlement. In determining this the court looks to all the circumstances of the case: see Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 [20], [21]; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 [37], [43] and [85]. In the latter case Giles JA said at [37]:'

"The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank [1976] Fam 93) where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 54 FCR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 235"."

12 The plaintiff did not act unreasonably in rejecting the second defendant's offer. The second defendant's offer, in effect, required the plaintiff to capitulate. If the plaintiff accepted the second defendant's offer it would be obliged to discontinue the proceedings but had no assurance that the second defendant would execute an assignment of lease. The second defendant's position was that the plaintiff would have to satisfy the requirements of cl 8 of the lease and only if the second defendant was satisfied that those requirements were met would it execute an assignment of lease. In all the circumstances the plaintiff's rejection of the second defendant's offer of compromise does not warrant an award of indemnity costs.

13 At all times the first and second defendants were represented by separate solicitors. Both defendants were represented by the same counsel at trial. The plaintiff submits that the first and second defendants' costs of the action should be taxed as one bill with a single allowance for counsel and getting up the case for trial.

14 Order 66 r 2(d) of the Rules of the Supreme Court provides that, in the absence of any special order, where several defendants defended actions separately and it appears that the defendants or any of them might have joined in their defence, the Court may allow only one set of costs to those defendants as to whom it appears a joint defence might have been conducted. A party is entitled to be represented as it sees fit and cannot be compelled to share representation with another party. However, if there has been unnecessary separate representation, the court may allow one set of costs only to the parties who could reasonably have had common representation.

15 At the outset of the trial senior counsel for the defendants, Mr Zilko SC, submitted that there was no conflict of interest between the defendants and that they could properly be represented by one counsel. Mr Zilko SC conducted the case jointly on behalf of the defendants. In the course of cross-examination of the plaintiff's witnesses by Mr Zilko SC, counsel for the plaintiff, Mr McPhee, questioned whether Mr Zilko was asking questions on behalf of the first defendant or the second defendant. Mr Zilko responded, in effect, that the cross-examination was on behalf of the defendants jointly.

16 On the hearing of the motion for costs counsel for the plaintiffs, Mr Garnsworthy, submitted that the plaintiffs had separate interests. That is a relevant but not determinative factor. Numerous defendants appearing by the same solicitor, even if their interests are different, may be allowed only one set of costs where they might have joined in one defence. In the end, the court must exercise its discretion so as to achieve a just result in the particular circumstances of the case.

17 In all the circumstances, it was reasonable for each of the defendants to retain and be represented by separate solicitors. There were some issues in the action that were issues between the plaintiff and the second defendant but not the first defendant. For example, the plaintiff pleaded that the second defendant was estopped by its conduct from denying that it had consented to the assignment of the lease to the plaintiff. By the time the matter was entered for trial the defendants were able to form the judgment that there was no conflict of interest between them and they might properly be represented by one counsel. However, it was not clear at the outset that that would be the case. In all the circumstances, it was reasonable for them to be separately represented. I will not order that the defendant's costs be taxed as one bill.

18 The defendants are only entitled to one counsel fee. Subject to any special order, the amount allowable to the first and second defendants together for counsel fees must not exceed the maximum allowed under the Legal Practitioners (Supreme Court Contentious Business) Determination ("the Legal Costs Determination") in force from time to time. That was conceded by counsel for the defendants on the hearing of the motion for costs.

19 Each of the defendants asked that a certificate be granted for two counsel pursuant to Item 19(b) in the schedule to the Legal Costs Determination.

20 The Legal Practitioners Act 1893 (WA), s 58M established a Legal Costs Committee. By s 58W(1) (now s 210(2) of the Legal Practice Act 2003) the Committee may make determinations regulating practitioners' remuneration in contentious business for the purpose of proceedings before courts including the Supreme Court. The determination currently in force is the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2004. Counsel's fees are the subject of Item 19. Sub Item 19(a) specifies the maximum amount for the fee on brief. Sub Item 19(b) specifies the maximum amount for fee on brief for Senior Counsel but only where two or more counsel are certified for. The determination does not contemplate a situation where senior counsel appears alone.

21 Item 19 of the determination is based upon the corresponding item in the Rules of the Supreme Court for the schedule which applied prior to the Legal Costs Determination of 15 July 1988. The rule that the senior counsel fee applied only where two or more counsel were certified for originated at a time when the practice of Senior Counsel was to appear only with a junior. In Western Australia the ethical rule requiring Senior Counsel to appear with a junior has been abolished.

22 Counsel for the defendants, Mr Garnsworthy, submitted that the court may grant a certificate for second counsel even though only one counsel appeared at trial. I do not think that is the correct or preferable approach to the issue. The question whether the court should certify for two or more counsel is a different question from whether or not counsel should be allowed fees at the senior counsel rate, notwithstanding that some considerations may be common to both questions. In Stanley v Phillips [1966] HCA 24; (1966) 115 CLR 470 Barwick CJ at 478 - 480 emphasised that in considering whether or not to allow the fees of more than one counsel it is not a question of the level of experience or competence of counsel required by the case; it is a question of whether the case reasonably requires the services of two counsel. Furthermore, it is inappropriate to certify for two counsel where only one counsel appeared at trial.

23 That is not the end of the matter. There are some cases when it is proper in the circumstances of the case that senior counsel should be briefed. It is undesirable that the allowance for senior counsel should be at the junior counsel rate unless a second counsel appears. That would encourage parties to brief junior counsel when it is unnecessary and solely for the purpose of accessing the Senior Counsel rate. It is not desirable to attempt to set out a comprehensive list of the factors most likely to affect the decision whether or not it was reasonable to instruct Senior Counsel. However, in any particular case the relevant considerations might include the nature of the case, its importance for the client, the amount of damages likely to be recovered, the general importance of the case, and any particular requirements of the case.

24 In this case, having regard to the nature of the case, its importance for both defendants and the legal issues involved, it was reasonable for the defendants to instruct Senior Counsel.

25 I am of the opinion that the amount of costs allowable in respect of the defendants' counsel fees under Item 19 of the schedule to the Determination is inadequate because of the unusual difficulty and complexity of the matter. It is appropriate to make a special costs order under s 215(2) of the Legal Practice Act 2003. The special order will be to the effect that the counsel fees of the defendants are to be taxed having regard to the amounts allowable for Senior Counsel.

Special orders for costs pursuant to s 215(2) of the Legal Practice Act

26 The defendants seek orders that the limits for getting up case for trial and giving discovery of documents be removed. The effect of the order sought is that the taxing officer would fix the amount for those items without regard to the limit in the Determination. Mr Garnsworthy submitted that the order should be made because of the unusual complexity of the matter.

27 I find that the matter is one of unusual complexity. Subsection 215(2) of the Legal Practice Act requires that the matter be one of unusual complexity not that it be of special or exceptional complexity. There are a number of factors that lead me to the conclusion that this matter was one of unusual complexity. They include that there were some complex and difficult issues of law involved in the case.

28 Before the court may make a special order under subs 215(2) of the Legal Practice Act I must be of the opinion that the amount of costs allowable in respect of the matter under the relevant Determinations is inadequate because of the unusual difficulty, complexity or importance of the matter. The second defendant's claim that the amount otherwise allowable for those items is inadequate is based upon the matters put forward in an affidavit of Mr Mancini, the solicitor who has the conduct of the matter on behalf of the second defendant. Mr Mancini deposes:

"I have reviewed the files held by Jackson McDonald in respect of this matter. The majority of the work was performed by myself. My hourly rate from the commencement of the action and until 1 July 2005 was $286 per hour inclusive of GST and subsequent it was $330 per hour inclusive of GST.

I estimate from my review of the files that getting up for the trial exceeds the scale by between 80 to 100 hours and discovery by approximately 3 hours."

29 The maximum amount allowable for giving discovery under the 2002 Determination is calculated by allowing 10 hours at the hourly rate for a junior practitioner. The maximum amount allowable for giving discovery under the 2004 Determination is calculated by allowing 10 hours at the hourly rate for a senior practitioner. I am not satisfied from the evidence that the maximum amount allowable for giving discovery is inadequate. The number of documents discovered does not of itself satisfy me that the scale allowance is inadequate. There is no evidence of any particular difficulty in attending to discovery.

30 I am not satisfied that the amount allowable under the 2002 and 2004 Determinations for getting up case for trial is inadequate. The maximum amount allowable is $31,300 under the 2002 Determination and $34,100 under the 2004 Determination. Those amounts are calculated on the basis of 100 hours at the hourly rate applicable to a senior practitioner.

31 Mr Mancini says that getting up for the trial exceeded the scale by between 80 to 100 hours. However, the amount allowable is not shown to be inadequate merely because the number of hours spent by the solicitors on getting up the case for trial exceeded, or even greatly exceeded, the number of hours allowed under the relevant Determinations. The first defendant called only one witness - the first defendant himself. The second defendant called only two witnesses, the second defendant's company secretary and a solicitor who gave limited evidence based primarily on documents. Even allowing for other inquiries, the multiple proofing of the witnesses and all the matters required to get the case up for trial, it has not been demonstrated that the burden of getting up the case for trial was so great that the amount allowable under the scale is inadequate.

32 There is another matter relevant to the question of a special order for costs. On the third day of the trial, 17 August 2005, the second defendant applied to amend its defence. After hearing argument I gave the second defendant leave to amend its defence and adjourned the trial to give the plaintiff an opportunity to consider the situation arising from the amendment. The defendants should not have any of the costs of that day of the trial or any of the solicitor's costs caused or occasioned by the amendment.

33 Each of the defendants seek an order that any reserved costs be awarded to each of the defendants. Counsel submitted that the reserved costs are those relating to the motion for judgment. The defendants should have the costs of attending on the reserve judgment and of settling and extracting the judgment. However, the defendants should not have the additional costs occasioned by the extended argument in relation to costs. Having regard to the reasonableness of the submissions put by each party and the outcome of the costs argument no party should have the benefit or burden of an order for the costs of that argument.

34 The provision of a transcript to counsel was reasonably necessary for the conduct of the trial. There will be a special order that the first defendant is entitled to the costs of obtaining a transcript.

Agreed statement of facts and objections to the evidence

35 The first defendant seeks an order that there be an additional allowance beyond that otherwise allowable on the scale for the fees of counsel relating to the agreed statement of facts and objections to the evidence.

36 Paragraph 4 of each of the 2002 and 2004 Determinations removes any doubt about whether costs discretion remains in the court. Order 66 r 18 of the Rules of the Supreme Court provides that in any matter not specially provided for in any relevant scale, the court may allow the costs by way of analogy according to the item in the scale which is most nearly applicable thereto or if in the opinion of the court there is no such item, the costs shall be fixed at such sum as in the opinion of the court is adequate in the circumstances.

37 The preparation of a statement of agreed facts and objections to witness statements was work properly carried out. It was done pursuant to court directions. In so far as the work in or incidental to the preparation of the statements was done by the solicitors it is work falling within the getting up case for trial. However, Mr Garnsworthy submits that counsel's fee on brief does not cover counsel's work in settling an agreed statement of facts or objections to witness statements.

38 In Loveday v Renton (No 2) [1992] 3 All ER 184, Hobhouse J said at 190 that the brief covers all the work done by way of preparation for representation at the trial and attendance on the first day of the trial. At 191 Hobhouse J said:

"The preparation by counsel of his examinations-in-chief and cross-examinations and of his final submissions are an ordinary part of his conduct of a trial on behalf of his client. It is all part of the work which he accepts an obligation to perform by accepting the brief and for which he is remunerated by the brief fee and the agreed refreshers.

Written submissions are now a commonplace feature of heavy civil litigation and are no longer exceptional ... Skeleton arguments, dramatis personae, chronologies etc are now required for a wide range of proceedings in court and in chambers. To some extent it has always been an incident of advocacy that forensic documents may have to be produced. Unless some different agreement is made, the brief fee must take all this into account."

39 Written objections to witness statements are now a feature of litigation in this court. The common form of trial directions provides for the delivery of such documents. Counsel's work in settling written objections to witness statements is part of the work for which counsel is remunerated by the brief fee. Similarly, where an agreed statement of facts is prepared counsel's work in settling the statement is covered by the brief fee. I decline to make an order for additional allowances in respect of the statement of agreed facts or written objections to witness statements.

40 I will hear the parties in relation to the final orders that should be made to give effect to these reasons.